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, 1997
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 91201-2397
- -------------------------------------- ----------------------
(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, 1997:
860,734 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 March 31, 1997
and December 31, 1996 2
Condensed Statements of Income for the three
months ended March 31, 1997 and 1996 3
Condensed Statement of Shareholders' Equity for the
three months ended March 31, 1997 4
Condensed Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. OTHER INFORMATION 9
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XX, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
---------------- ----------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $608,000 $881,000
Marketable securities of affiliate, at market value (cost of $148,000) 290,000 310,000
Rent and other receivables 37,000 40,000
Prepaid expenses 36,000 46,000
Real estate facilities at cost:
Building, land improvements and equipment 11,829,000 11,795,000
Land 5,824,000 5,824,000
---------------- ----------------
17,653,000 17,619,000
Less accumulated depreciation (3,290,000) (3,170,000)
---------------- ----------------
14,363,000 14,449,000
---------------- ----------------
Total assets $15,334,000 $15,726,000
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $423,000 $383,000
Dividends payable 267,000 714,000
Advance payments from renters 89,000 81,000
Shareholders' equity:
Series A common, $.01 par value, 1,393,165 shares authorized,
860,734 shares issued and outstanding in 1997 and 1996 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 15,634,000 15,634,000
Cumulative net income 5,464,000 5,170,000
Cumulative distributions (6,697,000) (6,430,000)
Unrealized gain in marketable securities 142,000 162,000
---------------- ----------------
Total shareholders' equity 14,555,000 14,548,000
---------------- ----------------
Total liabilities and shareholders' equity $15,334,000 $15,726,000
================ ================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XX, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1997 1996
------------- -------------
(Restated)
REVENUES:
<S> <C> <C>
Rental income $799,000 $748,000
Dividends from marketable securities of affiliate 2,000 2,000
Interest income 6,000 5,000
------------- -------------
807,000 755,000
------------- -------------
COSTS AND EXPENSES:
Cost of operations 311,000 273,000
Management fees paid to affiliate 48,000 38,000
Depreciation 120,000 118,000
Administrative 34,000 33,000
Interest expense - 2,000
------------- -------------
513,000 464,000
------------- -------------
NET INCOME $294,000 $291,000
============= =============
Primary earnings per share - Series A $0.31 $0.31
============= =============
Fully diluted earnings per share - Series A $0.24 $0.24
============= =============
Dividends declared per share:
Series A $0.28 $0.28
============= =============
Series B $0.28 $0.28
============= =============
Weighted average Common shares outstanding:
Primary - Series A 860,734 870,734
============= =============
Fully diluted - Series A 1,209,025 1,219,025
============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Public Storage Properties XX, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
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, 1996 860,734 $8,000 90,859 $1,000 257,432 $3,000
Net income
Unrealized loss in marketable
securities
Cash distributions declared:
$.28 per share - Series A
$.28 per share - Series B
------------ ------------ ------------ ------------ ------------- ------------
Balances at March 31, 1997 860,734 $8,000 90,859 $1,000 257,432 $3,000
============ ============ ============ ============ ============= ============
</TABLE>
<TABLE>
Public Storage Properties XX, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Unrealized
Cumulative gain (loss) Total
Paid-in net Cumulative in marketable shareholders'
capital income distributions securities equity
------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $15,634,000 $5,170,000 ($6,430,000) $162,000 $14,548,000
Net income 294,000 294,000
Unrealized loss in marketable
securities (20,000) (20,000)
Cash distributions declared:
$.28 per share - Series A (241,000) (241,000)
$.28 per share - Series B (26,000) (26,000)
------------- ------------- --------------- -------------- ---------------
Balances at March 31, 1997 $15,634,000 $5,464,000 ($6,697,000) $142,000 $14,555,000
============= ============= =============== ============== ===============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1997 1996
------------ ------------
(Restated)
Cash flows from operating activities:
<S> <C> <C>
Net income $294,000 $291,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 120,000 118,000
Decrease in rent and other receivables 3,000 5,000
Decrease in prepaid expenses 10,000 1,000
Amortization of prepaid management fees - 38,000
Increase in accounts payable 40,000 14,000
Increase in advance payments from renters 8,000 1,000
------------ ------------
Total adjustments 181,000 177,000
------------ ------------
Net cash provided by operating activities 475,000 468,000
------------ ------------
Cash flows from investing activities:
Additions to real estate facilities (34,000) (9,000)
------------ ------------
Net cash used in investing activities (34,000) (9,000)
------------ ------------
Cash flows from financing activities:
Distributions paid to shareholders (714,000) (558,000)
Borrowing on credit facility - 150,000
Repayment of borrowing on credit facility - (150,000)
------------ ------------
Net cash used in financing activities (714,000) (558,000)
------------ ------------
Net decrease in cash and cash equivalents (273,000) (99,000)
Cash and cash equivalents at the beginning of the period 881,000 538,000
------------ ------------
Cash and cash equivalents at the end of the period $608,000 $439,000
============ ============
Supplemental schedule of non-cash investing and financing activities:
Decrease (increase) in fair value of marketable securities $20,000 $(14,000)
============ ============
Unrealized (loss) gain on marketable securities $(20,000) $14,000
============ ============
</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, 1996.
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, 1997 and December 31, 1996, the results of its operations for the
three months ended March 31, 1997 and 1996 and its cash flows for the three
months then ended.
3. The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results expected for the full year.
4. Certain prior year amounts have been reclassified in order to conform with
current year presentation.
5. 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 March 31, 1997 was $290,000. The Company recognized $2,000 in
dividends for the three months ended March 31, 1997.
6. The Company has 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. At March 31, 1997 and for the three months then ended, 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 three months ended March 31, 1997 and 1996
was $294,000 and $291,000, respectively, representing an increase of $3,000 or
1%. Net operating income of the Company's facilities (rental income less cost of
operations, management fees paid to affiliate and depreciation expense) was
unchanged compared to prior year.
Rental income for the three months ended March 31, 1997 and 1996 was
$799,000 and $748,000, respectively, representing an increase of $51,000 or 7%.
This increase is primarily due to an increase in rental rates at all of the
Company's properties. The increase in rental income was offset by increases in
cost of operations and management fees.
The Company's mini-warehouse operations had weighted average occupancy
levels of 89% and 92% for the three month periods ended March 31, 1997 and 1996,
respectively.
Cost of operations (including management fees paid to affiliate and
depreciation expense) for the three months ended March 31, 1997 and 1996 was
$479,000 and $429,000, respectively, representing an increase of $50,000 or 12%.
This increase is primarily attributable to increases in payroll ($12,000),
advertising ($9,000) and management fees ($10,000).
In 1995, the Company prepaid eight months of 1996 management fees on its
mini-warehouse operations discounted at a 14% effective rate to compensate for
early payment. As a result, management fee expense for the three months ended
March 31, 1996 was $7,000 lower than it would have been under the customary,
undiscounted fee structure.
During the three months ended March 31, 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 1997 since the Company did not have any borrowings
against its credit facility.
LIQUIDITY AND CAPITAL RESOURCES.
- -------------------------------
Cash flows from operating activities ($475,000 for the three months ended
March 31, 1997) and cash reserves were sufficient to meet all current
obligations and distributions of the Company during the three months ended March
31, 1997. Management expects cash flows from operations will be sufficient to
fund capital expenditures and quarterly distributions.
The Company has 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. At March 31, 1997, and
for the three months then ended there was no outstanding balance on the credit
facility.
7
<PAGE>
The Company's Board of Directors has authorized the Company to purchase up
to 300,000 shares of Series A common stock. As of March 31, 1997, the Company
had repurchased 184,140 shares of Series A common stock, none of which were
purchased in the first quarter of 1997.
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 March 31,
1997 was $290,000. The Company recognized $2,000 in dividends for the three
months ended March 31, 1997.
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.
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 1996, the Company's Federal tax depreciation
was $296,000.
SUPPLEMENTAL INFORMATION.
- ------------------------
Funds from operations (FFO) is defined by the Company, consistent with the
definition of FFO by the National Association of Real Estate Investment Trusts
(NAREIT), as net income (loss) (computed in accordance with generally accepted
accounting principles) before depreciation and extraordinary or non-recurring
items. FFO for the three months ended March 31, 1997 and 1996 was $414,000 and
$409,000, respectively. FFO is presented because the Company, as well as many
industry analysts, consider FFO to be one measure of the performance of the
Company, ie, one that generally reflects changes in the Company's net operating
income. FFO does not take into consideration scheduled principal payments on
debt and capital improvements. Accordingly, FFO is not necessarily a substitute
for the Company's cash flow or net income as a measure of the Company's
liquidity or operating performance or ability to pay distributions. Furthermore,
the NAREIT definition of FFO does not address the treatment of certain items and
all REITs do not treat items the same way in computing FFO. Accordingly,
comparisons of levels of FFO among REITs may not necessarily be meaningful.
8
<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 14, 1997
PUBLIC STORAGE PROPERTIES XX, INC.
BY: /s/ David P. Singelyn
---------------------
David P. Singelyn
Vice President and
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000870541
<NAME> PUBLIC STORAGE PROPERTIES XX, INC.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 608,000
<SECURITIES> 290,000
<RECEIVABLES> 73,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 971,000
<PP&E> 17,653,000
<DEPRECIATION> (3,290,000)
<TOTAL-ASSETS> 15,334,000
<CURRENT-LIABILITIES> 779,000
<BONDS> 0
0
0
<COMMON> 12,000
<OTHER-SE> 14,543,000
<TOTAL-LIABILITY-AND-EQUITY> 15,334,000
<SALES> 0
<TOTAL-REVENUES> 807,000
<CGS> 0
<TOTAL-COSTS> 479,000
<OTHER-EXPENSES> 34,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 294,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 294,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294,000
<EPS-PRIMARY> .31
<EPS-DILUTED> .24
</TABLE>
