-----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, R75H3JZe154Jw7/VH4cYIMMqhhDlh9JmZyFKuG7PJyy2E4wC1bBdHqYLOTknXLhh Y0zeP7JoYsudYuzVn4JpQA== 0000866368-97-000013.txt : 19970515 0000866368-97-000013.hdr.sgml : 19970515 ACCESSION NUMBER: 0000866368-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC STORAGE PROPERTIES XVII INC CENTRAL INDEX KEY: 0000869805 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 954300891 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10859 FILM NUMBER: 97605476 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: 8142448080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 10-Q 1 10-Q 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 1-10859 ------- PUBLIC STORAGE PROPERTIES XVII, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-4300891 - ---------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 701 Western Ave 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: 2,776,023 shares of $.01 par value Series A shares 324,989 shares of $.01 par value Series B shares 920,802 shares of $.01 par value Series C shares --------------------------------------------------- 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 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II. OTHER INFORMATION 11-12 PUBLIC STORAGE PROPERTIES XVII, INC. CONDENSED BALANCE SHEETS
March 31, December 31, 1997 1996 --------------- --------------- (Unaudited) ASSETS ------ Cash and cash equivalents $819,000 $214,000 Rent and other receivables 100,000 110,000 Prepaid expenses 120,000 147,000 Real estate facilities at cost: Building, land improvements and equipment 44,861,000 44,615,000 Land 22,837,000 22,837,000 --------------- --------------- 67,698,000 67,452,000 Less accumulated depreciation (19,467,000) (19,003,000) --------------- --------------- 48,231,000 48,449,000 --------------- --------------- Total assets $49,270,000 $48,920,000 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Accounts payable $862,000 $1,022,000 Dividends payable 962,000 1,426,000 Advance payments from renters 306,000 294,000 Note payable 5,510,000 4,650,000 Shareholders' equity: Series A common, $.01 par value, 4,983,165 shares authorized, 2,776,023 shares issued and outstanding in 1997 and 1996 28,000 28,000 Convertible Series B common, $.01 par value, 324,989 shares authorized, issued and outstanding 3,000 3,000 Convertible Series C common, $.01 par value, 920,802 shares authorized, issued and outstanding 9,000 9,000 Paid-in-capital 51,769,000 51,769,000 Cumulative net income 22,156,000 21,092,000 Cumulative distributions (32,335,000) (31,373,000) --------------- --------------- Total shareholders' equity 41,630,000 41,528,000 --------------- --------------- Total liabilities and shareholders' equity $49,270,000 $48,920,000 ============= ===============
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES XVII, INC. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, ----------------------------------- 1997 1996 --------------- ----------------- REVENUES: Rental income $2,735,000 $2,634,000 Interest income 4,000 5,000 --------------- ----------------- 2,739,000 2,639,000 --------------- ----------------- COSTS AND EXPENSES: Cost of operations 887,000 855,000 Management fees paid to affiliates 158,000 141,000 Depreciation 464,000 528,000 Interest expense 101,000 135,000 Administrative 65,000 62,000 --------------- ----------------- 1,675,000 1,721,000 --------------- ----------------- NET INCOME $1,064,000 $918,000 =============== ================= Primary earnings per share - Series A $0.35 $0.29 =============== ================= Fully diluted earnings per share - Series A $0.26 $0.23 =============== ================= Dividends declared per share: Series A $0.31 $0.31 =============== ================= Series B $0.31 $0.31 =============== ================= Weighted average Common shares outstanding: Primary - Series A 2,776,023 2,776,023 =============== ================= Fully diluted - Series A 4,021,814 4,021,814 =============== =================
See accompanying notes. 3 Public Storage Properties XVII, Inc. Condensed Statement of Shareholders' Equity (Unaudited)
Convertible Convertible Series A Series B Series C Shares Amount Shares Amount Shares Amount ------------- ------------- ------------- ------------- ------------- ------------- Balances at December 31, 1996 2,776,023 $28,000 324,989 $3,000 920,802 $9,000 Net income Cash distributions declared: $.31 per share - Series A $.31 per share - Series B ------------- ------------- ------------- ------------- ------------- ------------- Balances at March 31, 1997 2,776,023 $28,000 324,989 $3,000 920,802 $9,000 ============= ============= ============= ============= ============= =============
Public Storage Properties XVII, Inc. Condensed Statement of Shareholders' Equity (Unaudited)
Cumulative Total Paid-in net Cumulative shareholders' capital income distributions equity -------------- --------------- -------------- -------------- Balances at December 31, 1996 $51,769,000 $21,092,000 ($31,373,000) $41,528,000 Net income 1,064,000 1,064,000 Cash distributions declared: $.31 per share - Series A (861,000) (861,000) $.31 per share - Series B (101,000) (101,000) -------------- --------------- -------------- -------------- Balances at March 31, 1997 $51,769,000 $22,156,000 ($32,335,000) $41,630,000 ============== =============== ============== ==============
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES XVII, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 1997 1996 -------------- ---------------- Cash flows from operating activities: Net income $1,064,000 $918,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 464,000 528,000 Decrease in rent and other receivables 10,000 11,000 Amortization of prepaid management fees - 112,000 Decrease in prepaid expenses 27,000 - Decrease in accounts payable (160,000) (268,000) Increase in advance payments from renters 12,000 8,000 -------------- ---------------- Total adjustments 353,000 391,000 -------------- ---------------- Net cash provided by operating activities 1,417,000 1,309,000 -------------- ---------------- Cash flows from investing activities: Additions to real estate facilities (246,000) (38,000) -------------- ---------------- Net cash used in investing activities (246,000) (38,000) -------------- ---------------- Cash flows from financing activities: Proceeds from note payable to bank 860,000 800,000 Distributions paid to shareholders (1,426,000) (1,522,000) Purchase of Company Series A common stock - (73,000) -------------- ---------------- Net cash used in financing activities (566,000) (795,000) -------------- ---------------- Net increase in cash and cash equivalents 605,000 476,000 Cash and cash equivalents at the beginning of the period 214,000 437,000 -------------- ---------------- Cash and cash equivalents at the end of the period $819,000 $913,000 ============== ================
See accompanying notes. 5 PUBLIC STORAGE PROPERTIES XVII, 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. The Company has an unsecured revolving credit facility with a bank for borrowings up to $7,500,000 for working capital purposes and general corporate purposes. Outstanding borrowings on the credit facility, at the Company's option, bear interest at either the bank's prime rate plus .25% (8.75% at March 31, 1997) or the bank's LIBOR rate plus 2.25% (8.0% at March 31, 1997). Interest is payable monthly until maturity. On January 1, 2002, the remaining unpaid principal and interest is due and payable. During the three months ended March 31, 1997, the Company borrowed $1,100,000 and made a scheduled principal payment of $240,000. At March 31, 1997, the outstanding balance on the credit facility was $5,510,000. In April 1997, the Company's Board of Directors authorized the Company to obtain a revolving credit facility from Public Storage, Inc. ("PSI"), an affiliate, for a maximum of $5,500,000 to repay and terminate its existing credit facility. In May 1997, the Company borrowed $5,425,000 from PSI to pay off the outstanding balance on its credit facility. The PSI loan bears interest at 7%, payable monthly and matures in April 1998. 6 5. In April 1997, the Company and Public Storage, Inc. ("PSI") agreed, subject to certain conditions, to merge. Upon the merger, each outstanding share of the Company's common stock series A (other than shares held by PSI or by holders of the Company's common stock series A ("Series A Shareholders") who have properly exercised dissenters' rights under California law ("Dissenting Shares")) will be converted into the right to receive cash, PSI common stock or a combination of the two, as follows: (i) with respect to a certain number of shares of the Company's common stock series A (not to exceed 20% of the outstanding common stock series A of the Company, less any Dissenting Shares), upon a Series A Shareholder's election, $19.63 in cash, subject to reduction as described below or (ii) that number (subject to rounding) of shares of PSI common stock determined by dividing $19.63, subject to reduction as described below, by the average of the per share closing prices on the New York Stock Exchange of PSI common stock during the 20 consecutive trading days ending on the fifth trading day prior to the special meeting of the Company's shareholders. The consideration paid by PSI to the Series A Shareholders in the merger will be reduced by the amount of cash distributions required to be paid to the Series A Shareholders by the Company prior to completion of the merger (estimated at $0.81 per share) in order to satisfy the Company's REIT distribution requirements ("Required REIT Distributions"). The consideration received by the Series A Shareholders in the merger, however, along with any Required REIT Distributions, will not be less than $19.63 per share of the Company's common stock series A, which amount represents the market value of the Company's real estate assets at March 17, 1997 (based on an independent appraisal) and interest of the Series A Shareholders in the estimated net asset value of its other assets at June 30, 1997. Additional distributions will be made to the Series A Shareholders to cause the Company's estimated net asset value allocable to the Series A Shareholders as of the date of the merger to be substantially equivalent to $19.63 per share. Upon the merger, each share of the Company's common stock series B and common stock series C (other than shares held by PSI) would be converted into the right to receive $10.26 in PSI common stock (valued as in the case of the Company's common stock series A) plus (i) any additional distributions equal to the amount by which the Company's estimated net asset value allocable to the holders of the Company's common stock series B and C as of the date of the merger exceeds $10.26 per share and (ii) the estimated Required REIT Distributions payable to the holders of the Company's common stock series B of $0.81 per share. The common stock of the Company held by PSI will be canceled in the merger. The merger is conditioned on, among other requirements, approval by the Company's shareholders. It is expected that the merger will close in June or July of 1997. PSI is the Company's mini-warehouse operator and owns 41.1% of the total combined shares of the Company's common stock series A, B and C. 7 PUBLIC STORAGE PROPERTIES XVII, 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 $1,064,000 and $918,000, respectively, representing an increase of $146,000 or 16%. This increase is primarily a result of an increase in property net operating income (rental income less cost of operations, management fees paid to affiliates and depreciation expense) at the Company's business park operations combined with a decrease in interest expense. Rental income for the three months ended March 31, 1997 and 1996 was $2,735,000 and $2,634,000, respectively, representing an increase of $101,000 or 4%. The Company's mini-warehouse facilities contributed $65,000 to the increase in rental income due to an increase in rental rates at all of the Company's facilities. The increase in rental income at the Company's mini-warehouse operations was offset by an increase in cost of operations and management fees. The Company's business park operations also showed an increase in rental income due to an increase in rental rates. The increase in rental income combined with a decrease in cost of operations caused an increase in net operating income at the Company's business park operations. The Company's mini-warehouse operations had weighted average occupancy levels of 89% and 87% for the three month periods ended March 31, 1997 and 1996, respectively. The Company's business park operations had weighted average occupancy levels of 94% and 92% for the three month periods ended March 31, 1997 and 1996, respectively. Cost of operations (including management fees paid to affiliates and depreciation expense) was $1,509,000 and $1,524,000 for the three months ended March 31, 1997 and 1996, respectively, representing a decrease of $15,000 or 1%. Cost of operations at the Company's mini-warehouse operations increased primarily due to increases in payroll, management fees and advertising costs. Cost of operations at the Company's business park operations decreased primarily due to a decrease in snow removal costs incurred in 1997 compared to 1996. Snow removal costs were higher in 1996 than amounts typically incurred due to higher than normal snow levels experienced at the Company's Fairfax, Virginia business park facility. 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 $11,000 lower than it would have been under the customary, undiscounted fee structure. Interest expense was $101,000 and $135,000 for the three months ended March 31, 1997 and 1996, respectively, representing a decrease of $34,000. This decrease was primarily due to a lower outstanding loan balance for the three months ended March 31, 1997 compared to the same period in 1996. 8 Liquidity and Capital Resources. - -------------------------------- Cash flows from operating activities ($1,417,000 for the three months ended March 31, 1997), 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 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 $7,500,000 for working capital purposes and general corporate purposes. Outstanding borrowings on the credit facility, at the Company's option, bear interest at either the bank's prime rate plus .25% (8.75% at March 31, 1997) or the bank's LIBOR rate plus 2.25% (8.0% at March 31, 1997). Interest is payable monthly until maturity. On January 1, 2002, the remaining unpaid principal and interest is due and payable. During the three months ended March 31, 1997, the Company borrowed $1,100,000 and made a scheduled principal payment of $240,000. At March 31, 1997, the outstanding balance on the credit facility was $5,510,000. In April 1997, the Company's Board of Directors authorized the Company to obtain a revolving credit facility from Public Storage, Inc. ("PSI"), an affiliate, for a maximum of $5,500,000 to repay and terminate its existing credit facility. In May 1997, the Company borrowed $5,425,000 from PSI to pay off the outstanding balance on its credit facility. The PSI loan bears interest at 7%, payable monthly and matures in April 1998. The Company's Board of Directors has authorized the Company to purchase up to 1,300,000 shares of Series A common stock. As of March 31, 1997, the Company had repurchased 961,351 shares of Series A common stock, none of which were purchased in the first quarter of 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 $1,459,000. 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 $1,528,000 and $1,446,000, respectively. FFO is presented because the Company, as well as many industry analysts, consider FFO to be one measure of the performance of the 9 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. Proposed Merger. - ---------------- See footnote 5 to condensed financial statements for a discussion of a proposed merger. 10 PART II. OTHER INFORMATION ITEMS 1 through 4 are inapplicable. ITEM 5. Other Information ----------------- In April 1997, the Company and Public Storage, Inc. ("PSI") agreed, subject to certain conditions, to merge. Upon the merger, each outstanding share of the Company's common stock series A (other than shares held by PSI or by holders of the Company's common stock series A ("Series A Shareholders") who have properly exercised dissenters' rights under California law ("Dissenting Shares")) will be converted into the right to receive cash, PSI common stock or a combination of the two, as follows: (i) with respect to a certain number of shares of the Company's common stock series A (not to exceed 20% of the outstanding common stock series A of the Company, less any Dissenting Shares), upon a Series A Shareholder's election, $19.63 in cash, subject to reduction as described below or (ii) that number (subject to rounding) of shares of PSI common stock determined by dividing $19.63, subject to reduction as described below, by the average of the per share closing prices on the New York Stock Exchange of PSI common stock during the 20 consecutive trading days ending on the fifth trading day prior to the special meeting of the Company's shareholders. The consideration paid by PSI to the Series A Shareholders in the merger will be reduced by the amount of cash distributions required to be paid to the Series A Shareholders by the Company prior to completion of the merger (estimated at $0.81 per share) in order to satisfy the Company's REIT distribution requirements ("Required REIT Distributions"). The consideration received by the Series A Shareholders in the merger, however, along with any Required REIT Distributions, will not be less than $19.63 per share of the Company's common stock series A, which amount represents the market value of the Company's real estate assets at March 17, 1997 (based on an independent appraisal) and interest of the Series A Shareholders in the estimated net asset value of its other assets at June 30, 1997. Additional distributions will be made to the Series A Shareholders to cause the Company's estimated net asset value allocable to the Series A Shareholders as of the date of the merger to be substantially equivalent to $19.63 per share. Upon the merger, each share of the Company's common stock series B and common stock series C (other than shares held by PSI) would be converted into the right to receive $10.26 in PSI common stock (valued as in the case of the Company's common stock series A) plus (i) any additional distributions equal to the amount by which the Company's estimated net asset value allocable to the holders of the Company's common stock series B and C as of the date of the merger exceeds $10.26 per share and (ii) the estimated Required REIT Distributions payable to the holders of the Company's common stock series B of $0.81 per share. The common stock of the Company held by PSI will be canceled in the merger. The merger is conditioned on, among other requirements, approval by the Company's shareholders. It is expected that the merger will close in June or July of 1997. PSI is the Company's mini-warehouse operator and owns 41.1% of the total combined shares of the Company's common stock series A, B and C. 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. --------------------------------- A) EXHIBITS: The following exhibits are included herein: (2) Agreement and Plan of Reorganization among the Company, Public Storage Properties XVI, Inc., Public Storage Properties XVIII, Inc., Public Storage Properties XIX, Inc. and PSI dated as of April 9, 1997. Filed with PSI's Schedule 13D (Amendment No. 9) relating to the beneficial ownership of securities issued by Public Storage Properties XVI, Inc. and incorporated herein by reference. (27) Financial Data Schedule B) REPORTS ON FORM 8-K A Form 8-K dated April 9, 1997 was filed on April 10, 1997, which reported under Item 5 that the Company and PSI had agreed, subject to certain conditions, to merge. 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 XVII, INC. BY: /s/ David P. Singleyn --------------------- David P. Singelyn Vice President and Chief Financial Officer 12 EX-27 2 FDS --
5 0000869805 PUBLIC STORAGE PROPERTIES XVII, INC. 1 US 3-MOS Dec-31-1997 Jan-1-1997 Mar-31-1997 1 819,000 0 220,000 0 0 1,039,000 67,698,000 (19,467,000) 49,270,000 2,130,000 5,510,000 0 0 40,000 41,590,000 49,270,000 0 2,739,000 0 1,509,000 65,000 0 101,000 1,064,000 0 1,064,000 0 0 0 1,064,000 .35 .26
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