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 1-10913
-------
PUBLIC STORAGE PROPERTIES XIX, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
California 95-4061087
- ------------------------------- ----------------------
(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:
3,044,771 shares of $.01 par value Series A shares
283,224 shares of $.01 par value Series B shares
802,466 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 XIX, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
---------------------- ---------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 1,377,000 $ 1,296,000
Rent and other receivables 60,000 26,000
Prepaid expenses 98,000 286,000
Real estate facilities at cost:
Building, land improvements and equipment 43,730,000 43,525,000
Land 17,791,000 17,791,000
---------------------- ---------------
61,521,000 61,316,000
Less accumulated depreciation (13,196,000) (11,887,000)
---------------------- ---------------
48,325,000 49,429,000
---------------------- ---------------
Total assets $ 49,860,000 $ 51,037,000
====================== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 764,000 $ 662,000
Dividends payable 599,000 1,621,000
Advance payments from renters 237,000 237,000
Shareholders' equity:
Series A common, $.01 par value,
4,342,762 shares authorized,
3,044,771 shares issued and
outstanding (3,091,371 shares issued
and outstanding in 1995) 30,000 31,000
Convertible Series B common, $.01 par
value, 283,224 shares authorized,
issued and outstanding 3,000 3,000
Convertible Series C common, $.01 par
value, 802,466 shares authorized,
issued and outstanding 8,000 8,000
Paid-in-capital 53,978,000 54,656,000
Cumulative income 6,917,000 4,690,000
Cumulative distributions (12,676,000) (10,871,000)
---------------------- ---------------
Total shareholders' equity 48,260,000 48,517,000
---------------------- ---------------
Total liabilities and shareholders' equity $49,860,000 $51,037,000
====================== ===============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XIX, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
------------- -------------- ------------- --------------
REVENUES:
<S> <C> <C> <C> <C>
Rental income $2,144,000 $2,100,000 $6,300,000 $6,133,000
Interest income 13,000 16,000 23,000 31,000
------------- -------------- ------------- --------------
2,157,000 2,116,000 6,323,000 6,164,000
------------- -------------- ------------- --------------
COSTS AND EXPENSES:
Cost of operations 713,000 630,000 2,199,000 2,028,000
Management fees paid to affiliates 113,000 120,000 327,000 350,000
Depreciation 466,000 461,000 1,398,000 1,583,000
Administrative 66,000 61,000 166,000 163,000
Interest expense - - 6,000 -
------------- -------------- ------------- --------------
1,358,000 1,272,000 4,096,000 4,124,000
------------- -------------- ------------- --------------
NET INCOME $ 799,000 $ 844,000 $2,227,000 $2,040,000
============= ============== ============= ==============
Earnings per share:
Primary - Series A $0.25 $0.25 $0.68 $0.60
============= ============== ============= ==============
Fully diluted - Series A $0.20 $0.20 $0.54 $0.48
============= ============== ============= ==============
Dividends declared per share:
Series A $0.18 $0.18 $0.54 $0.52
============= ============== ============= ==============
Series B $0.18 $0.18 $0.54 $0.52
============= ============== ============= ==============
Weighted average common shares outstanding:
Primary - Series A 3,055,004 3,138,604 3,065,727 3,150,627
============= ============== ============= ==============
Fully diluted - Series A 4,140,694 4,224,294 4,151,417 4,236,317
============= ============== ============= ==============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Public Storage Properties XIX, 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>
Balances at December 31, 1995 3,091,371 $31,000 283,224 $3,000 802,466 $8,000 $54,656,000
Net income - - - - - - -
Repurchase of shares (46,600) (1,000) - - - - (678,000)
Cash distributions declared:
$.54 per share - Series A - - - - - - -
$.54 per share - Series B - - - - - - -
--------- ------- ------- ------- --------- ------- -----------
Balances at September 30, 1996 3,044,771 $30,000 283,224 $3,000 802,466 $8,000 $53,978,000
========= ======= ======= ======= ========= ====== ===========
</TABLE>
<TABLE>
Public Storage Properties XIX, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Cumulative Total
Net Cumulative Shareholders'
Income Distributions Equity
---------- ------------- -------------
<S> <C> <C> <C>
Balances at December 31, 1995 $4,690,000 ($10,871,000) $48,517,000
Net income 2,227,000 - 2,227,000
Repurchase of shares - - (679,000)
Cash distributions declared:
$.54 per share - Series A - (1,652,000) (1,652,000)
$.54 per share - Series B - (153,000) (153,000)
---------- ------------- -------------
Balances at September 30, 1996 $6,917,000 ($12,676,000) $48,260,000
========== ============== =============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XIX, 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 $2,227,000 $2,040,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 1,398,000 1,583,000
(Increase) decrease in rent and other receivables (34,000) 4,000
(Increase) decrease in prepaid expenses (19,000) 7,000
Amortization of prepaid management fees 207,000 -
Increase in accounts payable 102,000 208,000
Decrease in advance payments from renters - (2,000)
----------------- ---------------
Total adjustments 1,654,000 1,800,000
----------------- ---------------
Net cash provided by operating activities 3,881,000 3,840,000
----------------- ---------------
Cash flows from investing activities:
Additions to real estate facilities (294,000) (128,000)
----------------- ---------------
Net cash used in investing activities (294,000) (128,000)
----------------- ---------------
Cash flows from financing activities:
Distributions paid to shareholders (2,827,000) (2,315,000)
Purchase of Company Series A common stock (679,000) (832,000)
----------------- ---------------
Net cash used in financing activities (3,506,000) (3,147,000)
----------------- ---------------
Net increase in cash and cash equivalents 81,000 565,000
Cash and cash equivalents at the beginning of the period 1,296,000 1,321,000
----------------- ---------------
Cash and cash equivalents at the end of the period $1,377,000 $1,886,000
================= ===============
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES XIX, 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. In 1995, the Company prepaid eight months of 1996 management fees at a
total cost of $207,000. The amount has been expensed as management fees
paid to affiliate during the nine months ended September 30, 1996.
5. In December 1995, the Company obtained an unsecured revolving credit
facility with a bank for borrowings up to $6,000,000 for working capital
purposes and to repurchase the Company's stock. 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 April 1, 1997. Interest is payable monthly until
maturity. Principal will be payable quarterly beginning on April 1, 1997.
On January 1, 2002, the remaining unpaid principal and interest is due and
payable. During the first quarter of 1996, the Company borrowed and repaid
$450,000 on its line of credit facility. At September 30, 1996, there was
no outstanding balance on the credit facility.
6
<PAGE>
PUBLIC STORAGE PROPERTIES XIX, 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 $2,227,000 and $2,040,000, respectively, representing an increase of
$187,000 or 9%. This increase is primarily due to an increase in property net
operating income (rental income less cost of operations, management fees paid to
affiliates and depreciation expense). Net income for the three months ended
September 30, 1996 and 1995 was $799,000 and $844,000, respectively,
representing a decrease of $45,000 or 5%. This decrease is primarily the result
of a decrease in property net operating income.
Rental income for the nine months ended September 30, 1996 and 1995 was
$6,300,000 and $6,133,000, respectively, representing an increase of $167,000 or
3%. Rental income for the three months ended September 30, 1996 and 1995 was
$2,144,000 and $2,100,000, respectively, representing an increase of $44,000 or
2%. The Company's mini-warehouse operations showed increases in rental income of
$128,000 and $40,000 for the nine and three month periods ended September 30,
1996, respectively, compared to the same periods in 1995. These increases are
attributable to increased rental rates at a majority of the Company's
properties. The Company's four California properties contributed 43% of the
increase in rental income for the nine months ended September 30, 1996 as a
result of increased rental rates. The Company's business park operations
experienced increases in rental income of $39,000 and $4,000 for the nine and
three month periods ended September 30, 1996, respectively, as compared to the
same periods in 1995. The increase in rental income from business park
operations was generated by the Company's Virginia facility due to increases in
rental rates.
The Company's mini-warehouse operations had weighted average occupancy
levels of 88% and 89% for the nine month periods ended September 30, 1996 and
1995, respectively. The Company's business park operations had weighted average
occupancy levels of 99% for both the nine month periods ended September 30, 1996
and 1995.
Cost of operations (including management fees paid to affiliates and
depreciation expense) for the nine months ended September 30, 1996 and 1995 was
$3,924,000 and $3,961,000, respectively, representing a decrease of $37,000 or
1%. This decrease is primarily attributable to a decrease in depreciation
expense offset with increases in property tax expense, advertising and repairs
and maintenance costs. Depreciation expense decreased due to certain assets
being fully depreciated. Repairs and maintenance costs increased primarily due
to an increase in snow removal costs associated with higher than normal snow
levels experienced at the Company's properties in the eastern states. Property
taxes increased due to a one-time personal property tax refund received on the
Company's Fairfax, Virginia mini-warehouse property in 1995. Cost of operations
for the three months ended September 30, 1996 and 1995 was $1,292,000 and
$1,211,000, respectively, representing an increase of $81,000 or 7%. This
7
<PAGE>
increase is primarily the result of a one-time property tax refund received from
appealing a prior period tax assessment on one of the Company's Los Angeles
properties in September 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 included in management fees
paid to affiliates in the condensed statements of income. As a result of the
prepayment, the Company saved approximately $33,000 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
$6,000 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 ($3,881,000 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 $6,000,000 for working capital
purposes and to repurchase the Company's stock. 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 April 1, 1997. Interest is payable monthly until maturity.
Principal will be payable quarterly beginning on April 1, 1997. On January 1,
2002, the remaining unpaid principal and interest is due and payable. During the
first quarter of 1996, the Company borrowed and repaid $450,000 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 $0.18. In addition, consistent with the
Company's REIT distribution requirements, the Company's Board of Directors
declared a special distribution of $0.33 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 500,000 shares of Series A common stock. As of September 30, 1996, the
Company had repurchased 212,300 shares of Series A common stock, of which 46,600
were purchased in 1996.
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
8
<PAGE>
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 $1,122,000.
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 $3,625,000 and $3,623,000, respectively. FFO for the three months
ended September 30, 1996 and 1995 was $1,265,000 and $1,305,000, 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 14, 1996
PUBLIC STORAGE PROPERTIES XIX, 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> 0000870905
<NAME> PUBLIC STORAGE PROPERTIES XIX, 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> 1,377,000
<SECURITIES> 0
<RECEIVABLES> 158,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,535,000
<PP&E> 61,521,000
<DEPRECIATION> (13,196,000)
<TOTAL-ASSETS> 49,860,000
<CURRENT-LIABILITIES> 1,600,000
<BONDS> 0
0
0
<COMMON> 41,000
<OTHER-SE> 48,219,000
<TOTAL-LIABILITY-AND-EQUITY> 49,860,000
<SALES> 0
<TOTAL-REVENUES> 6,323,000
<CGS> 0
<TOTAL-COSTS> 3,924,000
<OTHER-EXPENSES> 166,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> 2,227,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,227,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,227,000
<EPS-PRIMARY> .68
<EPS-DILUTED> .54
</TABLE>
