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 June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number 0-8908
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PUBLIC STORAGE PROPERTIES IV, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3192402
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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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
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<PAGE>
INDEX
Page
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PART I. FINANCIAL INFORMATION
Condensed balance sheets at June 30, 2000
and December 31, 1999 2
Condensed statements of income for the three and
six months ended June 30, 2000 and 1999 3
Condensed statement of partners' equity for the
six months ended June 30, 2000 4
Condensed statements of cash flows for the
six months ended June 30, 2000 and 1999 5
Notes to condensed financial statements 6-7
Management's discussion and analysis of
financial condition and results of operations 8-9
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K. 10
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------- ----------------
(Unaudited)
ASSETS
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<S> <C> <C>
Cash and cash equivalents $ 290,000 $ 249,000
Marketable securities of affiliate (cost of $6,340,000 at
June 30, 2000 and $6,091,000 at December 31, 1999) 9,210,000 8,666,000
Rent and other receivables 145,000 389,000
Real estate facilities, at cost:
Buildings and equipment 16,909,000 16,797,000
Land 5,021,000 5,244,000
---------------- ----------------
21,930,000 22,041,000
Less accumulated depreciation (13,298,000) (12,815,000)
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8,632,000 9,226,000
Other assets 108,000 113,000
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Total assets $ 18,385,000 $ 18,643,000
================ ================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 284,000 $ 177,000
Deferred revenue 285,000 240,000
Note payable to commercial bank 10,725,000 14,050,000
Partners' equity:
Limited partners' equity, $500 per unit, 40,000 units
authorized, issued and outstanding 3,131,000 1,188,000
General partners' equity 1,090,000 413,000
Other comprehensive income 2,870,000 2,575,000
---------------- ----------------
Total partners' equity 7,091,000 4,176,000
---------------- ----------------
Total liabilities and partners' equity $ 18,385,000 $ 18,643,000
================ ================
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
REVENUES:
<S> <C> <C> <C> <C>
Rental income $ 2,356,000 $ 2,295,000 $ 4,692,000 $ 4,534,000
Dividends from marketable securities of affiliate 91,000 84,000 182,000 168,000
Gain on sale of land 61,000 - 61,000 -
Other income 1,000 1,000 2,000 4,000
------------- ------------- ------------- -------------
2,509,000 2,380,000 4,937,000 4,706,000
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Cost of operations 573,000 517,000 1,102,000 1,054,000
Management fees paid to affiliate 141,000 138,000 281,000 272,000
Depreciation 242,000 247,000 483,000 493,000
Administrative 33,000 19,000 63,000 46,000
Interest expense 184,000 270,000 388,000 554,000
------------- ------------- ------------- -------------
1,173,000 1,191,000 2,317,000 2,419,000
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NET INCOME $ 1,336,000 $ 1,189,000 $ 2,620,000 $ 2,287,000
============= ============= ============= =============
Limited partners' share of net income ($64.77 per
unit in 2000 and $56.55 per unit in 1999) $ 2,591,000 $ 2,262,000
General partners' share of net income 29,000 25,000
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$ 2,620,000 $ 2,287,000
============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Other
Limited General Comprehensive Total Partners'
Partners Partners Income Equity
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 1,188,000 $ 413,000 $ 2,575,000 $ 4,176,000
Change in unrealized gain of marketable
equity securities - - 295,000 295,000
Net income 2,591,000 29,000 - 2,620,000
Equity transfer (648,000) 648,000 - -
----------------- ----------------- ----------------- -----------------
Balance at June 30, 2000 $ 3,131,000 $ 1,090,000 $ 2,870,000 $ 7,091,000
================= ================= ================= =================
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
2000 1999
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Cash flows from operating activities:
<S> <C> <C>
Net income $ 2,620,000 $ 2,287,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 483,000 493,000
Gain on sale of land (61,000) -
(Increase) decrease in rent and other receivables (5,000) 3,000
Amortization of prepaid loan fees 1,000 -
Decrease in other assets 4,000 4,000
Increase in accounts payable 107,000 21,000
Increase in deferred revenue 45,000 39,000
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Total adjustments 574,000 560,000
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Net cash provided by operating activities 3,194,000 2,847,000
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Cash flows from investing activities:
Proceeds from sale of land 305,000 -
Additions to real estate facilities (133,000) (144,000)
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Net cash provided by (used in) investing activities 172,000 (144,000)
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Cash flows from financing activities:
Principal payments on note payable to commercial bank (3,325,000) (2,910,000)
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Net cash used in financing activities (3,325,000) (2,910,000)
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Net increase (decrease) in cash and cash equivalents 41,000 (207,000)
Cash and cash equivalents at beginning of period 249,000 433,000
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Cash and cash equivalents at end of period $ 290,000 $ 226,000
============= =============
Supplemental schedule of non-cash activities:
Receipt of stock dividend:
Marketable securities $ 249,000 $ -
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Rent and other receivables $ (249,000) $ -
============= =============
Increase in fair market value of marketable securities:
Marketable securities $ 295,000 $ 358,000
============= =============
Other comprehensive income $ 295,000 $ 358,000
============= =============
</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, 1999.
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 June 30, 2000, the results of its operations for the six
months ended June 30, 2000 and 1999 and its cash flows for the six
months then ended.
3. The results of operations for the six months ended June 30, 2000 are
not necessarily indicative of the results expected for the full year.
4. Marketable securities at June 30, 2000 consist of 381,980 shares of
common stock and 12,412 shares of Equity Stock, Series A of Public
Storage, Inc., a publicly traded real estate investment trust and a
general partner of the Partnership. We have designated our portfolio of
marketable securities as available for sale. Accordingly, at June 30,
2000, we have recorded the marketable securities at fair value, based
upon the closing quoted prices of the securities at June 30, 2000.
Changes in market value of marketable securities are reflected as
unrealized gains or losses directly in Partners' Equity and accordingly
have no effect on net income.
5. During September 1998, we borrowed $21,000,000 from a commercial bank.
The loan is unsecured and bears interest at the London Interbank
Offering Rate, ("LIBOR") rounded up to the nearest .125% plus 0.60% to
1.20% depending on our interest coverage ratio (7.35% at June 30,
2000). The loan requires monthly payments of interest and mature
September 2002. Principal may be paid, in whole or in part, at any time
without penalty or premium.
6
<PAGE>
5. (continued)
We have entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on a portion of its floating rate
debt. The agreement, which covers $11,500,000 of debt through March
2000 and $7,500,000 from March 2000 through September 2000, effectively
changes the interest rate exposure from floating rate to a fixed rate
of 5.22% plus 0.60% to 1.20% based on our interest coverage ratio
(5.82% as of June 30, 2000). Market gains and losses on the value of
the swap are deferred and included in income over the life of the
contract. We record the differences paid or received on the interest
rate swap in interest expense as payments are made or received. As of
June 30, 2000, the unrealized gain on the interest rate swap, if
required to be liquidated, was approximately $35,000.
6. We sold during May 2000 excess land adjacent to one of our operating
properties for $305,000. This resulted in a gain of $61,000 being
realized in the second quarter of 2000.
7
<PAGE>
PUBLIC STORAGE PROPERTIES IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
--------------------------
When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in Section
27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of
the Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors, which may
cause the actual results and performance of the Partnership to be materially
different from those expressed or implied in the forward looking statements.
Such factors include the impact of competition from new and existing real estate
facilities which could impact rents and occupancy levels at the real estate
facilities that the Partnership has an interest in; the Partnership's ability to
effectively compete in the markets that it does business in; the impact of the
regulatory environment as well as national, state, and local laws and
regulations including, without limitation, those governing Partnerships; and the
impact of general economic conditions upon rental rates and occupancy levels at
the real estate facilities that the Partnership has an interest in.
RESULTS OF OPERATIONS
---------------------
THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX
MONTHS ENDED JUNE 30, 1999:
Our net income for the six months ended June 30, 2000 was $2,620,000
compared to $2,287,000 for the six months ended June 30, 1999, representing an
increase of $333,000 or 15%. Our net income for the three months ended June 30,
2000 was $1,336,000 compared to $1,189,000 for the three months ended June 30,
1999, representing an increase of $147,000 or 12%. These increases are primarily
a result of increased operating results at our real estate facilities and a
decrease in interest expense resulting from our lower outstanding debt.
Rental income for the six months ended June 30, 2000 was $4,692,000
compared to $4,534,000 for the six months ended June 30, 1999, representing an
increase of $158,000 or 3%. Rental income for the three months ended June 30,
2000 was $2,356,000 compared to $2,295,000 for the three months ended June 30,
1999, representing an increase of $61,000 or 3%. These increases are primarily
attributable to higher rental rates at our mini-warehouse facilities. The
weighted average occupancy levels at the mini-warehouse facilities were 93% for
each of the six months ended June 30, 2000 and 1999 respectively. Annual
realized rent for the six months ended June 30, 2000 increased to $11.51 per
occupied square foot from $11.05 per occupied square foot for the six months
ended June 30, 1999.
Interest and other income decreased $2,000 for the six months ended
June 30, 2000 compared to the same period in 1999. The decrease is primarily a
result of the increase in the pay down of the Partnership note payable which
resulted in lower cash balances and consequently less interest earned.
8
<PAGE>
Dividend income from marketable securities of affiliate increased
$14,000 for the six months ended June 30, 2000 compared to the same period in
1999. The increase is equal to the dividends received on the Public Storage
Equity Stock, Series A which we received as a stock dividend in January 2000.
Cost of operations (including management fees paid to affiliate) for
the six months ended June 30, 2000 was $1,383,000 compared to $1,326,000 for the
six months ended June 30, 1999, representing an increase of $57,000 or 4%. Cost
of operations (including management fees paid to affiliate) for the three months
ended June 30, 2000 was $714,000 compared to $655,000 for the three months ended
June 30, 1999, representing an increase of $59,000 or 9%. This increase is
mainly attributable to increases in advertising and promotion expenses, tenant
and legal settlements, and repairs and maintenance expense.
Interest expense was $388,000 in the six months ended June 30, 2000
compared to $554,000 in the same period in 1999, a $166,000 or 30% decrease.
This decrease is mainly attributable to a lower outstanding principal balance.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash flows from operating activities ($3,194,000 for the six months
ended June 30, 2000) have been sufficient to meet all current obligations of the
Partnership.
During September 1998, we borrowed $21,000,000 from a commercial bank.
The loan is unsecured and bears interest at the London Interbank Offering Rate
("LIBOR") rounded up to the nearest .125% plus 0.60% to 1.20% depending on our
interest coverage ratio (7.35% at June 30, 2000). The loan requires monthly
payments of interest and matures September 2002. Principal may be paid, in whole
or in part, at any time without penalty or premium.
We have entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on a portion of its floating rate debt. The
agreement, which covers $11,500,000 of debt through March 2000 and $7,500,000
from March 2000 through September 2000, effectively changes the interest rate
exposure from floating rate to a fixed rate of 5.22% plus 0.60% to 1.20% based
on our interest coverage ratio (5.82% as of June 30, 2000). Market gains and
losses on the value of the swap are deferred and included in income over the
life of the contract. We record the differences paid or received on the interest
rate swap in interest expense as payments are made or received. As of June 30,
2000, the unrealized gain on the interest rate swap, if required to be
liquidated, was approximately $35,000.
9
<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:
(27) Financial Data Schedule
(b) 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: August 11, 2000
PUBLIC STORAGE PROPERTIES IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
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John Reyes
Senior Vice President and
Chief Financial Officer
10