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 [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
incorporation or organization) Identification Number)
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 March 31, 1997
and December 31, 1996 2
Condensed consolidated statements of income for the three
months ended March 31, 1997 and 1996 3
Condensed consolidated statements of cash flows for the three
months ended March 31, 1997 and 1996 4-5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial condition
and results of operations 7-8
PART II. OTHER INFORMATION
(Items 1 through 4 are not applicable)
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
<PAGE>
<TABLE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
-----------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 561,000 $ 413,000
Rent and other receivables 61,000 136,000
Real estate facilities, at cost:
Land 14,429,000 19,957,000
Buildings and equipment 45,399,000 73,238,000
-----------------------------------
59,828,000 93,195,000
Less accumulated depreciation (20,757,000) (34,144,000)
-----------------------------------
39,071,000 59,051,000
Investment in real estate entity 19,782,000 -
Other assets 118,000 232,000
-----------------------------------
$59,593,000 $59,832,000
===================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 653,000 $ 1,049,000
Advance payments from renters 411,000 402,000
Minority interest in general partnerships 38,839,000 38,611,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 19,411,000 19,490,000
General partner's equity 279,000 280,000
-----------------------------------
Total partners' equity 19,690,000 19,770,000
-----------------------------------
$59,593,000 $59,832,000
===================================
</TABLE>
See accompanying note.
2
<PAGE>
<TABLE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1997 1996
--------------------------------------
REVENUE:
<S> <C> <C>
Rental income $2,916,000 $3,751,000
Equity in income of real estate entity 128,000 -
Interest income 4,000 4,000
--------------------------------------
3,048,000 3,755,000
--------------------------------------
COSTS AND EXPENSES:
Cost of operations 1,016,000 1,439,000
Management fees 175,000 216,000
Depreciation and amortization 544,000 848,000
Administrative 19,000 17,000
--------------------------------------
1,754,000 2,520,000
--------------------------------------
Income before minority interest 1,294,000 1,235,000
Minority interest in income (874,000) (954,000)
--------------------------------------
NET INCOME $ 420,000 $ 281,000
======================================
Limited partners' share of net income
($2.86 per unit in 1997 and $1.40
per unit in 1996) $ 366,000 $ 179,000
General partner's share of net income 54,000 102,000
--------------------------------------
$ 420,000 $ 281,000
======================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1997 1996
------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 420,000 $ 281,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 544,000 848,000
Decrease in rent and other receivables 75,000 16,000
Decrease (increase) in other assets 114,000 (2,000)
Decrease in accounts payable (396,000) (225,000)
Increase in advance payments from renters 9,000 14,000
Equity in income of real estate entity (128,000) -
Minority interest in income 874,000 954,000
------------------------------------
Total adjustments 1,092,000 1,605,000
------------------------------------
Net cash provided by operating activities 1,512,000 1,886,000
------------------------------------
Cash flows from investing activities:
Investment in real estate partnership (1,000) -
Additions to real estate facilities (217,000) (87,000)
------------------------------------
Net cash used in investing activities (218,000) (87,000)
------------------------------------
Cash flows from financing activities:
Distributions to holder of minority interest (646,000) (842,000)
Distributions to partners (500,000) (1,000,000)
------------------------------------
Net cash used in financing activities (1,146,000) (1,842,000)
------------------------------------
Net increase (decrease) in cash and cash equivalents 148,000 (43,000)
Cash and cash equivalents at the beginning of the period 413,000 464,000
------------------------------------
Cash and cash equivalents at the end of the period $ 561,000 $ 421,000
====================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<CAPTION>
Three Months Ended
March 31,
----------------------------------
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
MARCH 31, 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 March 31, 1997, the results of operations for the
three months ended March 31, 1997 and 1996 and 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 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 name
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 intersts (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,
one of which was 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 were
based on the relative fair market value of the Partnership's commercial
property 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.
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 the 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
month ended March 31, 1997, reflects the Partnership's pro rata share of
the 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.
6
<PAGE>
PS PARTNERS IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996:
The Partnership's net income for the three months ended March 31, 1997 was
$420,000 compared to $281,000 for the three months ended March 31, 1996,
representing an increase of $139,000, or 50%. Excluding the 1996 operations for
the Partnership's business park facilities, the increase is primarily
attributable to a decrease in minority interest in income for those properties
held in joint venture with PSI, combined with an increase in the Partnership's
mini-warehouse operations.
Rental income for the Partnership's mini-warehouse operations was
$2,916,000 compared to $2,790,000 for the three months ended March 31, 1997 and
1996, respectively, representing an increase of $126,000, or 5%. The increase in
rental income was primarily attributable to increased rental rates at the
mini-warehouse facilities. The monthly average realized rent per square foot for
the mini-warehouse facilities was $.61 compared to $.58 for the three months
ended March 31, 1997 and 1996, respectively. The weighted average occupancy
levels at the mini-warehouse facilities decreased from 88% to 87% for the three
months ended March 31, 1996 and 1997, respectively. Cost of operations
(including management fees) increased $90,000, or 8%, to $1,191,000 from
$1,101,000 for the three months ended March 31, 1997 and 1996, respectively.
This increase is primarily attributable to increases in advertising, payroll,
and office expenses. Accordingly, for the Partnership's mini-warehouse
operations, property net operating income increased by $36,000, or 2%, from
$1,689,000 to $1,725,000 for the three months ended March 31, 1996 and 1997,
respectively.
7
<PAGE>
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
collectivley 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 10.4% of the initial capitalization of the
partnership underlying AOPP.
The Partnership accounts for its investment in the New REIT using the
equity method of accounting. The following table summarizes the Partnership's
equity in earnings from its investment in the New REIT for three months ended
March 31, 1997 compared to the operation of the exchanged business park
facilities for three months ended March 31, 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
1997 1996
------------------ -----------------
<S> <C> <C>
Equity in earnings of real estate entity $ 128,000 $ -
Rental income - 961,000
Cost of operations - 554,000
---------------- -------------
Net operating income 128,000 407,000
Depreciation - 336,000
---------------- -------------
$ 128,000 $ 71,000
================ =============
</TABLE>
Depreciation and amortization attributable to the Partnership's
mini-warehouse facilities increased $32,000 from $512,000 to $544,000 for the
three months ended March 31, 1996 and 1997, respectively. This increase was
primarily attributable to the depreciation of capital expenditures made during
1995 and 1996.
Minority interest in income was $874,000 in 1997 compared to $954,000 in
1996, representing a decrease of $80,000, or 8%. This decrease was primarily
attributable to a decrease in operations at 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
($1,512,000 for the three months ended March 31, 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. Total capital improvements were $217,000 for the three months ended
March 31, 1997 of which $133,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $445,000 ($3.48 per unit) and $55,000, respectively, during the first
three 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.
8
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 4 are not applicable.
Item 5 Other Information
-----------------
In February 1997, PSI completed a cash tender offer, which had
commenced in December 1996, pursuant to which PSI acquired a total of 14,787
additional limited partnership units at $300 per Unit.
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
The Partnership filed a Current Report on Form 8-K dated February 19,
1997 (filed February 25, 1997), pursuant to Item 1, which stated that as a
result of PSI's cash tender offer to purchase limited partnership units in
the Partnership ("Units") which was completed on February 19, 1997, as of
February 19, 1997 PSI beneficially owned 69,448 Units, representing 54.3%
of the Units, and is in a position to control all voting decisions with
respect to the Partnership.
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 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)
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000748901
<NAME> PS PARTNERS IV, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 561,000
<SECURITIES> 0
<RECEIVABLES> 61,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 622,000
<PP&E> 59,828,000
<DEPRECIATION> (20,757,000)
<TOTAL-ASSETS> 59,593,000
<CURRENT-LIABILITIES> 1,064,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,690,000
<TOTAL-LIABILITY-AND-EQUITY> 59,593,000
<SALES> 0
<TOTAL-REVENUES> 3,048,000
<CGS> 0
<TOTAL-COSTS> 1,191,000
<OTHER-EXPENSES> 563,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 420,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 420,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420,000
<EPS-PRIMARY> 2.86
<EPS-DILUTED> 2.86
</TABLE>
