<PAGE>
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, 1995
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 0-8908
------
PUBLIC STORAGE PROPERTIES IV, LTD.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3192402
- ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 N. Brand Boulevard
Glendale, California 91203
- ---------------------------------------- ----------------------
(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
----- -----
<PAGE>
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 1995
and December 31, 1994 2
Condensed statements of operations for the three and nine
months ended September 30, 1995 and 1994 3
Condensed statement of partners' deficit for the
nine months ended September 30, 1995 4
Condensed statements of cash flows for the
nine months ended September 30, 1995 and 1994 5
Notes to condensed financial statements 6-8
Management's discussion and analysis of
financial condition and results of operations 9-11
PART II. OTHER INFORMATION 12-13
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 1,416,000 $ 551,000
Marketable securities of affiliate (cost of $3,392,000) 5,116,000 3,948,000
Rent and other receivables 109,000 88,000
Real estate facilities at cost:
Buildings and equipment 14,991,000 14,703,000
Land 5,256,000 5,256,000
----------- ------------
20,247,000 19,959,000
Less accumulated depreciation (9,010,000) (8,461,000)
----------- ------------
11,237,000 11,498,000
----------- ------------
Other assets 353,000 420,000
----------- ------------
Total assets $18,231,000 $ 16,505,000
=========== ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Accounts payable $ 200,000 $ 48,000
Advances to reconstruct real estate facility - 237,000
Deferred revenue 239,000 292,000
Mortgage note payable 27,538,000 28,086,000
Partners' deficit:
Limited partners' deficit, $500 per unit, 40,000 units
authorized, issued and outstanding (8,508,000) (9,430,000)
General partners' deficit (2,962,000) (3,284,000)
Unrealized gain on marketable securities 1,724,000 556,000
----------- ------------
Total partners' deficit (9,746,000) (12,158,000)
----------- ------------
Total liabilities and partners' deficit $18,231,000 $ 16,505,000
=========== ============
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $1,798,000 $1,699,000 $5,257,000 $4,937,000
Dividends from marketable securities of affiliate 60,000 39,000 181,000 116,000
Other income 16,000 73,000 320,000 220,000
---------- ---------- ---------- ----------
1,874,000 1,811,000 5,758,000 5,273,000
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of operations 429,000 397,000 1,315,000 1,199,000
Management fees paid to affiliate 108,000 111,000 316,000 306,000
Depreciation and amortization 187,000 175,000 548,000 513,000
Administrative 20,000 20,000 80,000 50,000
Interest expense 747,000 766,000 2,255,000 2,310,000
---------- ---------- ---------- ----------
1,491,000 1,469,000 4,514,000 4,378,000
---------- ---------- ---------- ----------
NET INCOME $ 383,000 $ 342,000 $1,244,000 $ 895,000
---------- ---------- ---------- ----------
Limited partners' share of net income ($30.75 per
unit in 1995 and $22.13 per unit in 1994) $1,230,000 $ 885,000
General partners' share of net income 14,000 10,000
---------- ----------
$1,244,000 $ 895,000
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENT OF PARTNERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Gain on Total
Limited General Marketable Partners'
Partners Partners Securities Deficit
------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $(9,430,000) $(3,284,000) $ 556,000 $(12,158,000)
Change in unrealized gain on marketable securities - - 1,168,000 1,168,000
Net income 1,230,000 14,000 - 1,244,000
Equity transfer (308,000) 308,000 - -
----------- ----------- ---------- ------------
Balance at September 30, 1995 $(8,508,000) $(2,962,000) $1,724,000 $ (9,746,000)
----------- ----------- ---------- ------------
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,244,000 $ 895,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 549,000 513,000
Decrease in advances to reconstruct real estate facility (236,000) -
(Increase) decrease in rent and other receivables (21,000) 50,000
Decrease in other assets 67,000 66,000
Increase (decrease) in accounts payable 152,000 (242,000)
Decrease in deferred revenue (53,000) (293,000)
----------- -----------
Total adjustments 458,000 94,000
----------- -----------
Net cash provided by operating activities 1,702,000 989,000
----------- -----------
Cash flows from investing activities:
Insurance proceeds relating to damaged real estate facility - 837,000
Purchase of marketable securities - (693,000)
Expenditures to reconstruct damaged real estate facility (1,000) (1,282,000)
Additions to real estate facilities (288,000) (263,000)
----------- -----------
Net cash used in investing activities (289,000) (1,401,000)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage note payable (548,000) (494,000)
----------- -----------
Net cash used in financing activities (548,000) (494,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents 865,000 (906,000)
Cash and cash equivalents at the beginning of the period 551,000 2,807,000
----------- -----------
Cash and cash equivalents at the end of the period $ 1,416,000 $ 1,901,000
=========== ===========
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities $(1,168,000) $ (592,000)
=========== ===========
Unrealized gain on marketable securities $ 1,168,000 $ 592,000
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
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 Partnership's
Form 10-K for the year ended December 31, 1994.
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 Partnership's financial position at
September 30, 1995, the results of its operations for the three and nine
months ended September 30, 1995 and 1994 and its cash flows for the nine
months then ended.
3. The results of operations for the three and nine months ended September 30,
1995 are not necessarily indicative of the results expected for the full
year.
4. Marketable securities at September 30, 1995 consist of 274,675 common shares
of Storage Equities, Inc. ("SEI"), a publicly traded real estate investment
trust whose investment advisor is an affiliate of Public Storage, Inc.
("PSI"), a general partner of the Partnership. SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" requires marketable
securities to be classified as trading or available for sale. The
Partnership has designated its portfolio of marketable securities as
available for sale. Accordingly, at September 30, 1995, the Partnership has
recorded the marketable securities at fair value, based upon the closing
quoted prices of the securities at September 30, 1995, and a corresponding
unrealized gain totaling $1,724,000 as a credit to Partnership equity.
6
<PAGE>
5. Substantially all of the Partnership's facilities were acquired prior to the
time that it was customary to conduct environmental investigations in
connection with property acquisitions. During the six month period ended
June 30, 1995, the Partnership completed environmental assessments on its
properties. Those assessments indicate that the Partnership's property sites
do not have any significant environmental issues which would have a
materially adverse effect on the Partnership's financial position. Included
in administrative expenses on the statement of operations for the nine
months ended September 30, 1995 is approximately $25,000 incurred in
connection with the environmental assessments.
6. In 1993, the Partnership reached a settlement with its insurance carrier for
damage sustained to the property located in Miami, Florida from Hurricane
Andrew in August 1992 and for business interruption while the facility was
being reconstructed. The settlement provided for the payment of $2,987,000
consisting of (i) reconstruction and related costs of the facility and (ii)
business interruption. The insurance proceeds received with respect to
reconstruction were recorded on the balance sheet as "Advances to
reconstruct real estate facility" and has been reduced by the amount of
actual costs paid with respect to the reconstruction of the facility. The
facility recommenced operations in October 1994 and the reconstruction of
the facility was completed in the second quarter of 1995. The balance of
$236,000 in Advances to Reconstruct Real Estate Facility was recognized as
income during the second quarter of 1995 and is included in Other income on
the Condensed Statements of Operations.
7. PSI, a general partner of the Partnership, and Public Storage Management,
Inc. ("PSMI"), the Partnership's mini-warehouse property manager, have
entered into an Agreement and Plan of Reorganization by and among PSI, PSMI
and SEI, dated as of June 30, 1995, pursuant to which PSMI would be merged
into SEI. Prior to the merger, substantially all of the United States real
estate interests of PSI, together with Public Storage Commercial Properties
Group, Inc. and Public Storage Advisers, Inc. (SEI's investment adviser),
will be combined with PSMI. Upon completion of the merger, which is
scheduled to occur in November 1995, SEI would replace PSI as a general
partner of the Partnership. After the merger, B. Wayne Hughes would continue
as a general partner of the Partnership. The merger is subject to a number
of conditions.
7
<PAGE>
In November 1995, the Management Agreement with PSMI was amended to provide
that upon demand from PSMI or SEI made prior to December 15, 1995, the
Partnership agrees to prepay (within 15 days after such demand) up to 12
months of management fees (based on the management fees for the calendar
year immediately preceding such prepayment) discounted at the rate of 14%
per year to compensate for early payment.
8
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1994:
The Partnership's net income for the nine months ended September 30, 1995
and 1994 was $1,244,000 and $895,000, respectively, representing an increase of
$349,000 or 39%. Net income for the three months ended September 30, 1995 and
1994 was $383,000 and $342,000, respectively, representing an increase of
$41,000 or 12%. The increase for the nine months ended September 30, 1995 is
primarily attributed to $236,000 of income recognized as a result of actual cost
being lower than amounts received from insurance proceeds to reconstruct a real
estate facility located in Miami, Florida which was damaged by Hurricane Andrew
in August 1992 (see Note 6 in the Notes to Condensed Financial Statements). Also
contributing to the increase in net income for both the three and nine months
ended September 30, 1995 is an increase in operating results at the
Partnership's mini-warehouse facilities combined with decreased interest
expense.
Rental income was $5,257,000 compared to $4,937,000 for the nine months
ended September 30, 1995 and 1994, respectively, representing an increase of
$320,000 or 6%. Rental income was $1,798,000 compared to $1,699,000 for the
three months ended September 30, 1995 and 1994, respectively, representing an
increase of $99,000 or 6%. These increases are primarily attributable to an
increase in rental rates at the Partnership's mini-warehouse facilities offset
by a slight decrease in occupancy levels. The weighted average occupancy levels
at the mini-warehouse facilities were 85% and 86% for the nine months ended
September 30, 1995 and 1994, respectively.
Other income increased $100,000 for the nine months ended September 30,
1995 compared to the same period in 1994. Other income decreased $57,000 for the
three months ended September 30, 1995 compared to the same period in 1994. The
increase for the nine months ended September 30, 1995 is attributable to the
recognition of $236,000 in income from unused insurance proceeds, as discussed
above, offset by a lower amount of business interruption income recognized in
1995 over 1994. Included in Other income for the nine months ended September 30,
1995 and 1994 are $49,000 and $188,000, respectively, of business interruption
income. The decrease for the three months ended September 30, 1995 over 1994 is
9
<PAGE>
primarily due to the recognition of $57,000 in business interruption income in
the third quarter of 1994. No business interruption income was recognized in the
third quarter of 1995.
Dividend income from marketable securities of affiliate increased $65,000
and $21,000 for the nine and three month periods ended September 30, 1995,
respectively, compared to the same periods in 1994. These increases are
attributable to an increase in the number of shares owned in 1995 compared to
the same periods in 1994 and an increase in the dividend rate from $.21 to $.22
per quarter per share.
Cost of operations (including management fees paid to affiliate)
increased $126,000 to $1,631,000 from $1,505,000 for the nine months ended
September 30, 1995 and 1994, respectively. Cost of operations increased $29,000
to $537,000 from $508,000 for the three months ended September 30, 1995 and
1994, respectively. These increases are mainly attributable to increases in
payroll, utilities and repairs and maintenance costs.
Administrative expenses increased $30,000 for the nine months ended
September 30, 1995 compared to the same period in 1994 primarily as a result of
cost incurred on environmental assessments on the Partnership's properties.
Substantially all of the Partnership's facilities were acquired prior to the
time that it was customary to conduct environmental investigations in connection
with property acquisitions. During the first quarter of 1995, the Partnership
commenced environmental assessments on its properties and incurred $25,000 in
connection with those assessments. Those assessments indicate that the
Partnership's property sites do not have any significant environmental issues
which would have a materially adverse effect on the Partnership's financial
position.
Interest expense decreased $55,000 for the nine months ended September 30,
1995 compared to the same period in 1994 due primarily to a lower outstanding
loan balance in 1995 over 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operating activities ($1,702,000 for the nine months
ended September 30, 1995) have been sufficient to meet all current obligations
of the Partnership. During 1995, the Partnership anticipates approximately
$348,000 of capital improvements, of which $288,000 has been incurred through
September 30, 1995.
At September 30, 1995, the Partnership held 274,675 shares of common
stock (marketable securities) with a fair value totaling $5,116,000 (cost basis
of $3,392,000 at September 30, 1995) in Storage Equities,
10
<PAGE>
Inc. ("SEI"), a real estate investment trust whose investment advisor is an
affiliate of Public Storage, Inc. (a general partner of the Partnership). The
Partnership recognized $181,000 in dividends for the nine months ended September
30, 1995. SEI's stock price per share, as of September 30, 1995, has increased
$6.30 over the Partnership's cost resulting in a $1,724,000 increase in the
aggregate value of the securities.
In the third quarter of 1991, quarterly distributions were discontinued
to enable the Partnership to make principal payments that commenced in 1990 and
to increase cash reserves in subsequent years through 1998, at which time the
remaining principal balance is due.
11
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are inapplicable.
Item 6 Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are included herein:
(10) Amendment to Management Agreement among Public Storage
Management, Inc., Storage Equities, Inc. and the Partnership,
dated as of November 13, 1995.
(27) Financial Data Schedule
(b) Form 8-K
None
12
<PAGE>
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 13, 1995
PUBLIC STORAGE PROPERTIES IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner, Jr.
----------------------------
Ronald L. Havner, Jr.
Vice President and Chief
Financial Officer
(principal accounting and
financial officer)
13
<PAGE>
EXHIBIT 10
AMENDMENT TO MANAGEMENT AGREEMENTS
This Amendment to Management Agreements is executed as of November 13,
1995, by and among Public Storage Management, Inc. ("PSMI"), Storage Equities,
Inc. ("SEI") and each of the entities whose name appears on the signature pages
hereof under the designation "Owners" (collectively, the "Owners" and
individually, an "Owner").
A. At various dates between May 1976 and May 1978, PSMI and each of
the Owners entered into Management Agreements (collectively, the "Management
Agreements") providing for the management by PSMI of the mini-warehouses owned
by the Owners and monthly payments of management fees equal to 6% of the gross
revenues generated by Owners' mini-warehouses.
B. SEI and PSMI have entered into an Agreement and Plan of
Reorganization dated as of June 30, 1995 pursuant to which PSMI would be merged
with and into SEI. Upon completion of the merger, SEI will manage the mini-
warehouses owned by the Owners.
C. The general partners of the Owners believe that the Owners' prepayment
of management fees on the terms set forth in this Amendment is financially
beneficial to the Owners, and the parties hereto desire to modify each of the
Management Agreements to provide for such prepayment.
Now, therefore, the parties agree as follows:
1. The following shall be added as the last two sentences of the first
paragraph of Section 4 of each of the Management Agreements:
"Upon demand from SEI or PSMI made prior to December 15, 1995, each
of the Owners agrees to pay within 15 days after such demand in advance up
to 12 months of management fees discounted at the rate of 14% per year
(based on the management fees for the comparable period during the calendar
year immediately preceding such prepayment). The property manager shall be
deemed to have earned such prepayments at the time of payment thereof, and
Owners shall not be entitled to a return of such prepayment, or any portion
thereof, under any circumstances. In addition, the property manager shall
not be entitled to any further or additional payment of management fees for
a period with respect to which a prepayment is made hereunder because the
actual gross revenues for such period would have resulted in a higher
management fee had such prepayment not been made."
2. Other than as set forth in this Amendment, all of the provisions
contained in each of the Management Agreements are hereby ratified and approved.
1
<PAGE>
In witness whereof, the undersigned have executed this Amendment, as of
the day and year first above written.
"PSMI"
PUBLIC STORAGE MANAGEMENT, INC.
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
"SEI"
STORAGE EQUITIES, INC.
By: /s/ B. Wayne Hughes
-------------------
B. Wayne Hughes,
Chairman of the Board
"Owners"
PUBLIC STORAGE PARTNERS, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PARTNERS II, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
2
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PROPERTIES IV, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PROPERTIES V, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 1,416,000
<SECURITIES> 5,116,000
<RECEIVABLES> 109,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,641,000
<PP&E> 20,600,000
<DEPRECIATION> (9,010,000)
<TOTAL-ASSETS> 18,231,000
<CURRENT-LIABILITIES> 439,000
<BONDS> 27,538,000
<COMMON> 0
0
0
<OTHER-SE> (9,746,000)
<TOTAL-LIABILITY-AND-EQUITY> 18,231,000
<SALES> 0
<TOTAL-REVENUES> 5,758,000
<CGS> 0
<TOTAL-COSTS> 2,179,000
<OTHER-EXPENSES> 80,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,255,000
<INCOME-PRETAX> 1,244,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,244,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,244,000
<EPS-PRIMARY> 30.75
<EPS-DILUTED> 0
</TABLE>
