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, 1997
------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
------ -------
Commission File Number 0-14475
-------
PS PARTNERS IV, LTD.
(Exact name of registrant as specified in its charter)
-------------------------------------------------------
California 95-3931619
- ------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
701 Western Avenue
Glendale, California 91201-2394
- ---------------------------------------- ------------------------
(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
PART I. FINANCIAL INFORMATION
Condensed consolidated balance sheets at September 30, 1997
and December 31, 1996 2
Condensed consolidated statements of income for the three
and nine months ended September 30, 1997 and 1996 3
Condensed consolidated statements of cash flows for the
nine months ended September 30, 1997 and 1996 4-5
Notes to condensed consolidated financial statements 6-7
Management's discussion and analysis of financial condition
and results of operations 8-11
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 12
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
-----------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,083,000 $ 413,000
Rent and other receivables 93,000 136,000
Real estate facilities, at cost:
Land 14,429,000 19,957,000
Buildings and equipment 45,975,000 73,238,000
-----------------------------------
60,404,000 93,195,000
Less accumulated depreciation (21,870,000) (34,144,000)
-----------------------------------
38,534,000 59,051,000
Investment in real estate entity 20,122,000 -
Other assets 105,000 232,000
-----------------------------------
$ 59,937,000 $ 59,832,000
===================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 818,000 $ 1,049,000
Advance payments from renters 389,000 402,000
Minority interest in general partnerships 39,054,000 38,611,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 19,396,000 19,490,000
General partner's equity 280,000 280,000
-----------------------------------
Total partners' equity 19,676,000 19,770,000
-----------------------------------
$ 59,937,000 $ 59,832,000
===================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------------
1997 1996 1997 1996
-------------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 3,149,000 $ 3,819,000 $ 9,077,000 $ 11,340,000
Equity in income of real estate entity 159,000 - 469,000 -
Interest income 12,000 5,000 24,000 14,000
-------------------------------------------------------------------
3,320,000 3,824,000 9,570,000 11,354,000
-------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 1,001,000 1,513,000 3,033,000 4,420,000
Management fees 190,000 221,000 546,000 654,000
Depreciation and amortization 562,000 870,000 1,657,000 2,571,000
Administrative 39,000 38,000 118,000 118,000
-------------------------------------------------------------------
1,792,000 2,642,000 5,354,000 7,763,000
-------------------------------------------------------------------
Income before minority interest 1,528,000 1,182,000 4,216,000 3,591,000
Minority interest in income (996,000) (961,000) (2,810,000) (2,871,000)
-------------------------------------------------------------------
NET INCOME $ 532,000 $ 221,000 $ 1,406,000 $ 720,000
===================================================================
Limited partners' share of net income
($9.71 per unit in 1997 and $3.63
per unit in 1996) $ 1,243,000 $ 465,000
General partner's share of net income 163,000 255,000
-----------------------------------
$ 1,406,000 $ 720,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
------------------------------------
1997 1996
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,406,000 $ 720,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,657,000 2,571,000
Decrease (increase) in rent and other receivables 43,000 (37,000)
Decrease (increase) in other assets 127,000 (57,000)
(Decrease) increase in accounts payable (231,000) 90,000
Decrease in advance payments from renters (13,000) (22,000)
Equity in income of real estate entity (469,000) -
Minority interest in income 2,810,000 2,871,000
------------------------------------
Total adjustments 3,924,000 5,416,000
------------------------------------
Net cash provided by operating activities 5,330,000 6,136,000
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate entity (1,000) -
Additions to real estate facilities (792,000) (962,000)
------------------------------------
Net cash used in investing activities (793,000) (962,000)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to holder of minority interest (2,367,000) (2,415,000)
Distributions to partners (1,500,000) (2,499,000)
------------------------------------
Net cash used in financing activities (3,867,000) (4,914,000)
------------------------------------
Net increase in cash and cash equivalents 670,000 260,000
Cash and cash equivalents at the beginning of the period 413,000 464,000
------------------------------------
Cash and cash equivalents at the end of the period $ 1,083,000 $ 724,000
====================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
Nine Months Ended
September 30,
----------------------------------
1997 1996
----------------------------------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Investment in real estate entity $ (19,653,000) $ -
Transfer of real estate facilities for interest in real estate entity 19,653,000 -
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS IV, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. The accompanying unaudited condensed consolidated 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 consolidated 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, 1996.
2. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
of only normal accruals, necessary to present fairly the Partnership's
financial position at September 30, 1997, the results of operations
for the three and nine months ended September 30, 1997 and 1996 and
cash flows for the nine months then ended.
3. The results of operations for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
4. Effective January 2, 1997, Public Storage, Inc. ("PSI"), the
Partnership's general partner, formed a new private real estate
investment trust named American Office Park Properties, Inc. ("AOPP")
which will focus its investment efforts on the ownership and
management of commercial properties (also referred to as business park
facilities). In connection with the formation of AOPP, PSI and
affiliated partnerships transferred commercial properties to a newly
created partnership underlying AOPP in exchange for limited
partnership interests (AOPP and the underlying partnership
collectively referred to as the "New REIT"). The Partnership
participated in the initial transaction by exchanging its three
commercial properties, which were owned jointly by the Partnership and
PSI, for 500,000 limited partnership units, which represented
approximately 7.5% of the initial capitalization of the partnership
underlying AOPP.
The number of limited partnership units received by the Partnership
was based on the relative fair market value of the Partnership's
commercial properties exchanged compared to the aggregate of all other
real estate assets exchanged for limited partnership units in the
underlying partnership. The Partnership's limited partnership units,
pursuant to the terms and conditions of the governing documents, are
convertible into shares of common stock of AOPP.
6
<PAGE>
4. (Continued)
The general partners believe that the concentration of PSI's, the
Partnership's and affiliate entities' commercial properties into a
single entity will create a vehicle which should facilitate future
growth in this segment of the real estate industry. PSI, the
Partnership and the affiliates transferring real estate assets to the
New REIT will participate in the growth through their ownership
interests in the New REIT.
The Partnership accounts for its investment in New REIT using the
equity method of accounting; accordingly, equity in earnings of real
estate entity, as reflected on the Partnership's statement of income
for the three and nine months ended September 30, 1997, reflects the
Partnership's pro rata share of the earnings of the New REIT. The
investment was initially recorded at the Partnership's net book value
of its properties exchanged for limited partnership units. The
investment is subsequently adjusted for the Partnership's pro rata
share of income and distributions from the underlying partnership of
the New REIT.
7
<PAGE>
PS PARTNERS IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996:
The Partnership's net income for the three months ended September 30, 1997
was $532,000 compared to $221,000 for the three months ended September 30, 1996,
representing an increase of $311,000, or 141%. Excluding the 1996 operations for
the Partnership's business park facilities as compared to the 1997 equity in
income of real estate entity, the increase is primarily attributable to an
increase in the Partnership's mini-warehouse operations.
Rental income for the Partnership's mini-warehouse operations was
$3,149,000 compared to $3,005,000 for the three months ended September 30, 1997
and 1996, respectively, representing an increase of $144,000, or 5%. The
increase in rental income was primarily attributable to increased rental rates
at the mini-warehouse facilities, partially offset by decreased average
occupancy rates. The monthly average realized rent per square foot for the
mini-warehouse facilities was $.63 compared to $.59 for the three months ended
September 30, 1997 and 1996, respectively. The weighted average occupancy levels
at the mini-warehouse facilities decreased from 93% to 91% for the three months
ended September 30, 1996 and 1997, respectively. Cost of operations (including
management fees) decreased $25,000, or 2%, to $1,191,000 from $1,216,000 for the
three months ended September 30, 1997 and 1996, respectively. This decrease is
primarily attributable to decreases in payroll and repairs and maintenance
expenses, partially offset by increased management fee expenses. Accordingly,
for the Partnership's mini-warehouse operations, property net operating income
increased by $169,000, or 9%, from $1,789,000 to $1,958,000 for the three months
ended September 30, 1996 and 1997, respectively.
Effective January 2, 1997, Public Storage, Inc. ("PSI"), the Partnership's
general partner, formed a new private real estate investment trust named
American Office Park Properties, Inc. ("AOPP") which will focus its investment
efforts on the ownership and management of commercial properties. In connection
with the formation of AOPP, PSI and affiliated partnerships transferred
commercial properties to a newly created partnership underlying AOPP in exchange
for limited partnership interests (AOPP and the underlying partnership
collectively referred to as the "New REIT"). The Partnership participated in the
initial transaction by exchanging its three commercial properties, which were
owned jointly by the Partnership and PSI, for 500,000 limited partnership units,
which represented approximately 7.5% of the initial capitalization of the
partnership underlying AOPP.
The Partnership accounts for its investment in New REIT using the equity
method of accounting. The following table summarizes the Partnership's equity in
8
<PAGE>
earnings from its investment in the New REIT for the three months ended
September 30, 1997 compared to the operation of the exchanged business park
facilities for the three months ended September 30, 1996:
Three Months Ended September 30,
--------------------------------
1997 1996
--------------------------------
Equity in earnings of real estate entity $ 159,000 $ -
Rental income - 814,000
Cost of operations - 518,000
--------------------------------
Net operating income 159,000 296,000
Depreciation - 337,000
--------------------------------
$ 159,000 $ (41,000)
================================
Depreciation and amortization attributable to the Partnership's
mini-warehouse facilities increased $29,000 from $533,000 to $562,000 for the
three months ended September 30, 1996 and 1997, respectively. This increase was
primarily attributable to the depreciation of capital expenditures made during
1996 and 1997.
Minority interest in income increased $35,000, or 4%, to $996,000 from
$961,000 for the three months ended September 30, 1997 and 1996, respectively.
This increase was primarily attributable to an increase in net income (net of
depreciation) for the Partnership's real estate facilities owned jointly with
PSI.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996:
The Partnership's net income for the nine months ended September 30, 1997
was $1,406,000 compared to $720,000 for the nine months ended September 30,
1996, representing an increase of $686,000, or 95%. Excluding the 1996
operations for the Partnership's business park facilities as compared to the
1997 equity in income of real estate entity, the increase is primarily
attributable to an increase in the Partnership's mini-warehouse operations,
combined with a decrease in minority interest in income for those properties
held in joint venture with PSI.
Rental income for the Partnership's mini-warehouse operations was
$9,077,000 compared to $8,683,000 for the nine months ended September 30, 1997
and 1996, respectively, representing an increase of $394,000, or 5%. The
increase in rental income was primarily attributable to increased rental rates
at the mini-warehouse facilities, partially offset by decreased occupancy rates.
The monthly average realized rent per square foot for the mini-warehouse
facilities was $.62 compared to $.58 for the nine months ended September 30,
1997 and 1996, respectively. The weighted average occupancy levels at the
mini-warehouse facilities decreased from 91% to 89% for the nine months ended
September 30, 1996 and 1997, respectively. Cost of operations (including
management fees) increased $105,000, or 3%, to $3,579,000 from $3,474,000 for
the nine months ended September 30, 1997 and 1996, respectively. This increase
9
<PAGE>
is primarily attributable to increases in advertising, property tax, payroll,
and office expenses, partially offset by a decrease in repairs and maintenance
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating income increased by $289,000, or 6%, from $5,209,000 to $5,498,000
for the nine months ended September 30, 1996 and 1997, respectively.
The following table summarizes the Partnership's equity in earnings from
its investment in the New REIT for the nine months ended September 30, 1997
compared to the operation of the exchanged business park facilities for the nine
months ended September 30, 1996:
Nine Months Ended September 30,
-------------------------------
1997 1996
-------------------------------
Equity in earnings of real estate entity $ 469,000 $ -
Rental income - 2,657,000
Cost of operations - 1,600,000
-------------------------------
Net operating income 469,000 1,057,000
Depreciation - 999,000
-------------------------------
$ 469,000 $ 58,000
===============================
Depreciation and amortization attributable to the Partnership's
mini-warehouse facilities increased $85,000 from $1,572,000 to $1,657,000 for
the nine months ended September 30, 1996 and 1997, respectively. This increase
was primarily attributable to the depreciation of capital expenditures made
during 1996 and 1997.
Minority interest in income was $2,810,000 in 1997 compared to $2,871,000
in 1996, representing a decrease of $61,000, or 2%. This decrease was primarily
attributable to a decrease in net income (net of depreciation) for the
Partnership's real estate facilities owned jointly with PSI.
Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily from internally generated
cash from property operations and cash reserves. Cash generated from operations
($5,330,000 for the nine months ended September 30, 1997) has been sufficient to
meet all current obligations of the Partnership.
During 1997, the Partnership anticipates approximately $1,340,000 of
capital improvements (of which $663,000 represents PSI's joint venture share).
During 1995, the Partnership's property manager commenced a program to enhance
the visual appearance of the mini-warehouse facilities. Such enhancements
include new signs, exterior color schemes, and improvements to the rental
offices. This program continued in 1997. Total capital improvements were
$792,000 for the nine months ended September 30, 1997 of which $422,000
represents the Partnership's share.
10
<PAGE>
The Partnership paid distributions to the limited and general partners
totaling $1,336,000 ($10.44 per unit) and $164,000, respectively, during the
first nine months of 1997. Future distribution rates may be adjusted to levels
which are supported by operating cash flow after capital improvements and any
other necessary obligations.
11
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
(a) The following Exhibits are 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 13, 1997
PS PARTNERS IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
----------------------------------------
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000748901
<NAME> PS PARTNERS IV, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,083,000
<SECURITIES> 0
<RECEIVABLES> 93,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,176,000
<PP&E> 60,404,000
<DEPRECIATION> (21,870,000)
<TOTAL-ASSETS> 59,937,000
<CURRENT-LIABILITIES> 1,207,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,676,000
<TOTAL-LIABILITY-AND-EQUITY> 59,937,000
<SALES> 0
<TOTAL-REVENUES> 9,570,000
<CGS> 0
<TOTAL-COSTS> 3,579,000
<OTHER-EXPENSES> 1,775,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,406,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,406,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,406,000
<EPS-PRIMARY> 9.71
<EPS-DILUTED> 9.71
</TABLE>
