-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B15Z7jF9ctqEzGUmquRXbu/2F21xSvlKmpQDiPr4lZrPxUWxJSeZi406kUADUH3H 1e8ZFaa/7DUHu6hLOxzFNA== 0000912057-96-004954.txt : 19960325 0000912057-96-004954.hdr.sgml : 19960325 ACCESSION NUMBER: 0000912057-96-004954 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960322 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSION WEST PROPERTIES/NEW/ CENTRAL INDEX KEY: 0000704874 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510] IRS NUMBER: 952635431 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08383 FILM NUMBER: 96537344 BUSINESS ADDRESS: STREET 1: 6815 FLANDERS DR STE 250 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194503135 MAIL ADDRESS: STREET 1: 6815 FLANDERS DR STREET 2: SUITE 250 CITY: SAN DIEGO STATE: CA ZIP: 92121-3914 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 29, 1996 Commission File Number 1-8383 MISSION WEST PROPERTIES Incorporated in California IRS Employer Identification Number: 95-2635431 Principal Executive Offices: Telephone: (619) 450-3135 6815 Flanders Drive, Suite 250 San Diego, California 92121-3914 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 of the Registrant's common stock outstanding as of February 29, 1996 was 1,371,121. PART I FINANCIAL INFORMATION ITEM 1. QUARTERLY FINANCIAL STATEMENTS Following are the first quarter fiscal year 1996 consolidated financial statements (unaudited) and accompanying notes (unaudited). - 2 - MISSION WEST PROPERTIES Consolidated Balance Sheets
(Unaudited) February 29 November 30 ASSETS 1996 1995 ------------ ------------ Cash and cash equivalents $ 1,133,000 $ 566,000 Short-term investments, held-to-maturity 2,214,000 2,528,000 Real estate investments: Rental Properties, less accumulated depreciation of $9,396,000 in 1996 and $9,054,000 in 1995 ($45,403,000 pledged in 1996 and $45,729,000 in 1995) 46,813,000 47,136,000 Unimproved land ($461,000 pledged in 1996 and 1995) 461,000 461,000 ------------ ------------ 47,274,000 47,597,000 Less allowance for estimated losses (4,413,000) (4,413,000) ------------ ------------ Net real estate investments 42,861,000 43,184,000 Other assets, less allowances of $413,000 in 1996 and $541,000 in 1995 and accumulated depreciation of $314,000 in 1996 and $312,000 in 1995 1,032,000 1,292,000 ------------ ------------ $ 47,240,000 $ 47,570,000 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 31,700,000 $ 31,967,000 Accounts payable and accrued expenses 1,310,000 1,466,000 ------------ ------------ Total liabilities 33,010,000 33,433,000 ------------ ------------ Shareholders' equity: Common stock, no par value, 10,000,000 shares authorized; 1,371,121 shares issued and outstanding (1,368,721 in 1995) 19,456,000 19,446,000 Accumulated deficit (5,226,000) (5,309,000) ------------ ------------ Total shareholders' equity 14,230,000 14,137,000 ------------ ------------ $ 47,240,000 $ 47,570,000 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. - 3 - MISSION WEST PROPERTIES Consolidated Statements of Operations (Unaudited)
Three Months Ended -------------------------- February 29 February 28 1996 1995 ----------- ----------- REVENUES: Rental revenues from real estate $ 1,787,000 $ 1,762,000 Sales of real estate 35,000 60,000 Other, including interest 66,000 84,000 ----------- ----------- 1,888,000 1,906,000 ------------ ------------ EXPENSES: Operating expenses of real estate 371,000 407,000 Depreciation of real estate 342,000 330,000 General and administrative 265,000 243,000 Interest 771,000 884,000 ------------ ------------ 1,749,000 1,864,000 ------------ ------------ Income before income taxes 139,000 42,000 Provision for income taxes 56,000 10,000 ------------ ------------ NET INCOME $ 83,000 $ 32,000 ------------ ------------ ------------ ------------ NET INCOME PER SHARE $ 0.06 $ 0.02 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. - 4 - MISSION WEST PROPERTIES Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended ---------------------------- February 29 February 28 1996 1995 ----------- ----------- Cash flows from operating activities: Net income $ 83,000 $ 32,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 344,000 332,000 Changes in assets and liabilities: Increase in net real estate investments (19,000) (4,000) Decrease (increase) in other assets 258,000 (43,000) Decrease in accounts payable and accrued expenses (156,000) (251,000) ----------- ----------- Net cash provided by operating activities 510,000 66,000 ----------- ----------- Cash flows from investing activities: Net maturities of short-term investments 314,000 415,000 ----------- ----------- Cash flows from financing activities: Repayments on notes payable (267,000) (267,000) Proceeds from stock options exercised 10,000 - ----------- ----------- Net cash used for financing activities (257,000) (267,000) ----------- ----------- Net increase in cash and cash equivalents 567,000 214,000 Cash and cash equivalents at beginning of quarter 566,000 2,192,000 ----------- ----------- Cash and cash equivalents at end of quarter $ 1,133,000 $ 2,406,000 ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. - 5 - MISSION WEST PROPERTIES Notes to Consolidated Financial Statements (Unaudited) February 29, 1996 NOTE 1 -- BASIS OF PRESENTATION The accompanying consolidated financial statements (unaudited) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and, therefore, do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at financial statement date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The operating results for the interim period are not necessarily indicative of the results to be expected for a full fiscal year or for any future periods. In the opinion of management, the information furnished herein reflects all adjustments, consisting only of normal recurring accruals, that are necessary for a fair presentation of results for the unaudited interim period. NOTE 2 -- CASH FLOW INFORMATION For purposes of reporting cash flows, cash and cash equivalents include cash on hand, money market funds, certificates of deposit, and obligations of the U.S. Treasury with an original maturity of 90 days or less. Short-term investments consist of certificates of deposit and obligations of the U.S. Treasury with an original maturity exceeding 90 days. Cash paid during the quarter for interest was $738,000 in 1996 and $878,000 in 1995. Cash paid during the quarter for income taxes was $40,000 in 1995 (none in 1996). NOTE 3 -- NOTES PAYABLE
Notes payable comprise the following: February 29 November 30 1996 1995 ----------- ----------- Secured notes payable to banks, due April 1996 through 1998, interest $29,978,000 $30,218,000 rates ranging from 9% (fixed) to 9.75% (prime plus 1.5%), principal and interest due in monthly installments of $306,000, balance of principal due at maturity Unsecured note payable to bank, due April 1996, interest rate of 9.75% 250,000 250,000 (prime plus 1.5%), interest only due monthly, principal due at maturity Secured note payable to insurance company, due 1997, interest rate of 10%, principal and interest due in monthly installments of $21,000 1,472,000 1,499,000 ----------- ----------- $31,700,000 $31,967,000 ----------- ----------- ----------- -----------
NOTE 4 -- NET INCOME PER SHARE Net income per share is based on 1,368,747 and 1,467,610 shares, the weighted average number of shares outstanding during the first quarters of fiscal years 1996 and 1995, respectively. The effect of stock options is not significant and such effect is not reflected in the per share computations. - 6 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: FIRST QUARTER FISCAL 1996 COMPARED TO FIRST QUARTER FISCAL 1995 Compared to the first quarter of fiscal 1995, the Company's rental revenues from real estate remained relatively stable, increasing one percent, or $25,000, in fiscal 1996. The related operating expenses of real estate decreased $36,000, or nine percent, for a net operating improvement of $61,000 between years. These improvements resulted from an increase in occupancy levels, a decrease in bad debt expense, and a one-time property tax refund. Sales of real estate decreased $25,000 between years due to the nature of this item (declining balance of amounts receivable from a 1986 land sale). General and administrative expenses increased $22,000 during the first quarter of fiscal 1996 compared to fiscal 1995 as a result of legal fees incurred (Kennedy Heights litigation; see Part II, Item 1, "Legal Proceedings" below) and other individually insignificant items. During the first quarter of fiscal 1996, interest expense decreased $113,000 compared to fiscal 1995 as a result of decreases in the Company's aggregate borrowing rate (9.25 percent for the first quarter of fiscal 1996 compared to 10.25 percent for the first quarter of fiscal 1995), and a $2,415,000 reduction in outstanding notes payable. CHANGES IN FINANCIAL POSITION: FEBRUARY 29, 1996 COMPARED TO NOVEMBER 30, 1995 During the first quarter of fiscal 1996, cash and investments increased $253,000. This increase resulted primarily from a $118,000 bankruptcy settlement receipt from a former tenant and cash inflow from operations. Normal debt service (principal and interest payments) continued during the first quarter of fiscal 1996. Other assets decreased $260,000 during the first quarter of fiscal year 1996 due to the bankruptcy settlement receipt and various other collections on accounts receivable, and due to normal amortization of prepaid expenses. Accounts payable and accrued expenses decreased $156,000, or 11 percent, during the quarter primarily as a result of the timing of payments for property taxes, legal and audit fees, and payroll. LIQUIDITY AND CAPITAL RESOURCES: Management believes that the Company continues to be in a stable and competitive position with its current real estate portfolio. The portfolio continues to generate sufficient rental revenue to cover real estate operating expenses and interest expense and it is generating cash, after normal debt service (interest and monthly principal amortization). The rental properties currently are, in aggregate, 86 percent leased. The Company has had no significant property sales since 1990; the occurrences of major property sales depends on several factors, including prevailing market conditions, available financing for potential purchasers, and the Company's strategic plans. The Company continues to operate the portfolio and intends to pursue all viable growth or other opportunities, which may include the sale or redeployment of certain assets currently held in the real estate portfolio. The Company has no projects under development and none specifically planned. Three stabilized properties currently held have been reviewed as possible sale candidates; acquisition candidates would be considered in light of property sales or other available resources. The only other capital expenditures anticipated are interior improvements to existing buildings, which may be required as new tenants are obtained or existing leases extended. The real estate portfolio comprises operating properties that are either leased or partially available for lease. The Company plans to continue to finance its general and administrative operations with internally generated funds, including rental receipts from the rental properties, and existing cash and investments. The need for additional financing in the future would depend on the number and size of projects undertaken, if any. - 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED LIQUIDITY AND CAPITAL RESOURCES, CONTINUED: Approximately 41 percent of the Company's debt portfolio matures in April 1996. The renewal process has begun and management anticipates completion of such renewals (or the obtaining of replacement financing) during the second quarter of fiscal 1996 at terms similar to those currently in effect. Due to lingering effects of the sluggish economy and of financial institution failures (and the resulting revisions of lending practices), management is unable to predict whether principal paydowns will be required upon loan renewals, although none are anticipated at this time. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to certain legal proceedings in its ordinary course of business. A civil action for an unspecified amount of damages relating to environmental contamination was filed in May 1995 by residents in Kennedy Heights and certain nearby residential developments located in the greater Houston, Texas, area. The suit was filed in the 281st District Court of Harris County in Houston, Texas. The Company and 50 other parties were named as defendants. The Company was dismissed from the action without prejudice in December 1995 and agreed at that time to a tolling of the statute of limitations. ITEM 2. CHANGES IN SECURITIES No changes in the rights of the Company's securities occurred during the quarter ended February 29, 1996. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter ended February 29, 1996. ITEM 5. OTHER INFORMATION Not applicable. - 8 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS (27) Financial Data Schedules (b) REPORTS ON FORM 8-K None SIGNATURE Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. MISSION WEST PROPERTIES Registrant By: /s/ Katrina L. Thompson -------------------------------------------------- Katrina L. Thompson Chief Financial Officer & Secretary (Principal Financial and Accounting Officer) March 22, 1996 - 9 - EX-27 2 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheets as of February 29, 1996 and the related consolidated statements of operations for the three months then ended and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS NOV-30-1996 FEB-29-1996 3,347 0 362 327 0 0 329 314 47,240 0 31,700 0 0 19,456 (5,226) 47,240 0 1,888 0 713 265 12 771 139 56 83 0 0 0 83 .06 .06
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