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, 1998
------------------
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 September 30, 1998
and December 31, 1997 2
Condensed consolidated statements of income for the three
and nine months ended September 30, 1998 and 1997 3
Condensed consolidated statements of cash flows for the
nine months ended September 30, 1998 and 1997 4-5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial condition
and results of operations 7-11
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 12
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-----------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,401,000 $ 1,523,000
Rent and other receivables 89,000 81,000
Real estate facilities, at cost:
Land 14,428,000 14,428,000
Buildings and equipment 46,718,000 46,279,000
-----------------------------------
61,146,000 60,707,000
Less accumulated depreciation (24,199,000) (22,444,000)
-----------------------------------
36,947,000 38,263,000
Investment in real estate entity 20,103,000 20,001,000
Other assets 107,000 106,000
-----------------------------------
$ 60,647,000 $ 59,974,000
===================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 998,000 $ 702,000
Advance payments from renters 408,000 389,000
Minority interest in general partnerships 39,144,000 39,189,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 19,813,000 19,414,000
General partner's equity 284,000 280,000
-----------------------------------
Total partners' equity 20,097,000 19,694,000
-----------------------------------
$ 60,647,000 $ 59,974,000
===================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 3,342,000 $ 3,149,000 $ 9,613,000 $ 9,077,000
Equity in income of real estate entity 215,000 159,000 609,000 469,000
Interest income 39,000 12,000 91,000 24,000
-------------------------------------------------------------------
3,596,000 3,320,000 10,313,000 9,570,000
-------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 1,119,000 1,001,000 3,167,000 3,033,000
Management fees 199,000 190,000 578,000 546,000
Depreciation and amortization 587,000 562,000 1,755,000 1,657,000
Administrative 42,000 39,000 126,000 118,000
-------------------------------------------------------------------
1,947,000 1,792,000 5,626,000 5,354,000
-------------------------------------------------------------------
Income before minority interest 1,649,000 1,528,000 4,687,000 4,216,000
Minority interest in income (926,000) (996,000) (2,784,000) (2,810,000)
-------------------------------------------------------------------
NET INCOME $ 723,000 $ 532,000 $ 1,903,000 $ 1,406,000
===================================================================
Limited partners' share of net income
($13.55 per unit in 1998 and
$9.71 per unit in 1997) $ 1,735,000 $ 1,243,000
General partner's share of net income 168,000 163,000
-----------------------------------
$ 1,903,000 $ 1,406,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1998 1997
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,903,000 $ 1,406,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,755,000 1,657,000
(Increase) decrease in rent and other receivables (8,000) 43,000
(Increase) decrease in other assets (1,000) 127,000
Increase (decrease) in accounts payable 296,000 (231,000)
Increase (decrease) in advance payments from renters 19,000 (13,000)
Equity in income of real estate entity (609,000) (469,000)
Minority interest in income 2,784,000 2,810,000
------------------------------------
Total adjustments 4,236,000 3,924,000
------------------------------------
Net cash provided by operating activities 6,139,000 5,330,000
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from real estate entity 507,000 -
Investment in real estate entity - (1,000)
Additions to real estate facilities (439,000) (792,000)
------------------------------------
Net cash provided by (used in) investing activities 68,000 (793,000)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to holder of minority interest (2,829,000) (2,367,000)
Distributions to partners (1,500,000) (1,500,000)
------------------------------------
Net cash used in financing activities (4,329,000) (3,867,000)
------------------------------------
Net increase in cash and cash equivalents 1,878,000 670,000
Cash and cash equivalents at the beginning of the period 1,523,000 413,000
------------------------------------
Cash and cash equivalents at the end of the period $ 3,401,000 $ 1,083,000
====================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1998 1997
----------------------------------
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, net - 19,653,000
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS IV, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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, 1997.
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, 1998, the results of operations for the
three and nine months ended September 30, 1998 and 1997 and cash flows for
the nine months then ended.
3. The results of operations for the three and nine months ended September 30,
1998 are not necessarily indicative of the results to be expected for the
full year.
4. The City of Manchester, Airport Authority ("Airport Authority") intends to
acquire a parcel of land at the Partnerhsip's Manchester, New Hampshire
property through exercise of its right of eminent domain or pursuant to a
conveyance in lieu of an exercise of such power. The Airport Authority
intends to use the parcel of land for the widening of an adjoining road.
The Partnership is currently negotiating with the Airport Authority to
determine an equitable reparation settlement. The Partnership does not
anticipate the recognition of a loss as a result of the partial taking.
6
<PAGE>
PS PARTNERS IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
- --------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "forward looking" statements that involve risks and
uncertainties and are based upon a number of assumptions. Actual results and
trends may differ materially depending upon a number of factors. Information
regarding these factors is contained in the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and in the reports for the
quarterly periods on Form 10-Q for the quarters ended March 31, 1998 and June
30, 1998.
Results of Operations:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997:
The Partnership's net income for the three months ended September 30, 1998
was $723,000 compared to $532,000 for the three months ended September 30, 1997,
representing an increase of $191,000, or 36%. The increase was primarily due to
decreased minority interest in income for those properties held jointly with
PSI, an increase in property operations at the Partnership's real estate
facilities, and increased interest income.
Rental income for the Partnership's mini-warehouse operations was
$3,342,000 compared to $3,149,000 for the three months ended September 30, 1998
and 1997, respectively, representing an increase of $193,000, or 6%. The
increase in rental income was primarily attributable to increased rental rates
at the mini-warehouse facilities, combined with increased average occupancy
rates. The monthly average realized rent per square foot for the mini-warehouse
facilities was $.66 compared to $.63 for the three months ended September 30,
1998 and 1997, respectively. The weighted average occupancy levels at the
mini-warehouse facilities increased from 91% to 92% for the three months ended
September 30, 1997 and 1998, respectively. Cost of operations (including
management fees) increased $127,000, or 11%, to $1,318,000 from $1,191,000 for
the three months ended September 30, 1998 and 1997, respectively. This increase
is primarily attributable to an increase in advertising and promotion (due
primarily to the PSI national telephone reservation center) and payroll
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating income increased by $66,000, or 3%, from $1,958,000 to $2,024,000
for the three months ended September 30, 1997 and 1998, respectively.
Interest income increased $27,000, or 225%, from $12,000 to $39,000 for the
three months ended September 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
7
<PAGE>
Depreciation and amortization increased $25,000, or 4%, from $562,000 to
$587,000 for the three months ended September 30, 1997 and 1998, respectively.
This increase was primarily attributable to the depreciation of capital
expenditures made during 1997 and 1998.
Minority interest in income decreased $70,000, or 7%, to $926,000 from
$996,000 for the three months ended September 30, 1998 and 1997, respectively.
This decrease was primarily attributable to the allocation of depreciation and
amortization expense (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned with PSI) to PSI of
$168,000 for the three months ended September 30, 1998 compared to $51,000 for
the same period in 1997, partially offset by an increase in operations at the
Partnership's real estate facilities owned jointly with PSI.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997:
The Partnership's net income for the nine months ended September 30, 1998
was $1,903,000 compared to $1,406,000 for the nine months ended September 30,
1997, representing an increase of $497,000, or 35%. The increase was primarily
due to an increase in property operations at the Partnership's real estate
facilities, combined with increased interest income.
Rental income for the Partnership's mini-warehouse operations was
$9,613,000 compared to $9,077,000 for the nine months ended September 30, 1998
and 1997, respectively, representing an increase of $536,000, or 6%. The
increase in rental income was primarily attributable to increased rental rates
at the mini-warehouse facilities, combined with increased occupancy rates. The
monthly average realized rent per square foot for the mini-warehouse facilities
was $.65 compared to $.62 for the nine months ended September 30, 1998 and 1997,
respectively. The weighted average occupancy levels at the mini-warehouse
facilities increased from 89% to 90% for the nine months ended September 30,
1997 and 1998, respectively. Cost of operations (including management fees)
increased $166,000, or 5%, to $3,745,000 from $3,579,000 for the nine months
ended September 30, 1998 and 1997, respectively. This increase was primarily
attributable to increases in advertising and promotion (due primarily to the PSI
national telephone reservation center) expenses. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income increased
by $370,000, or 7%, from $5,498,000 to $5,868,000 for the nine months ended
September 30, 1997 and 1998, respectively.
Interest income increased $67,000, or 279%, from $91,000 to $24,000 for the
nine months ended September 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
8
<PAGE>
Depreciation and amortization increased $98,000, or 6%, from $1,657,000 to
$1,755,000 for the nine months ended September 30, 1997 and 1998, respectively.
This increase was primarily attributable to the depreciation of capital
expenditures made during 1997 and 1998.
Minority interest in income was $2,784,000 in 1998 compared to $2,810,000
in 1997, representing a decrease of $26,000. This decrease was primarily
attributable to the allocation of depreciation and amortization expense
(pursuant to the partnership agreement with respect to those real estate
facilities which are jointly owned with PSI) to PSI of $399,000 for the nine
months ended September 30, 1998 compared to $151,000 for the same period in
1997, partially offset by an increase 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
($6,139,000 for the nine months ended September 30, 1998) has been sufficient to
meet all current obligations of the Partnership.
During 1998, the Partnership anticipates approximately $850,000 of capital
improvements (of which $420,000 represents PSI's joint venture share). Total
capital improvements were $439,000 for the nine months ended September 30, 1998
of which $224,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $1,337,000 ($10.44 per unit) and $163,000, respectively, during the
first nine months of 1998. Future distribution rates may be adjusted to levels
which are supported by operating cash flow after capital improvements and any
other necessary obligations.
Impact of the Year 2000 Issue
- -----------------------------
Public Storage, Inc. ("PSI"), the general partner and property manager, has
completed an assessment of all of its hardware and software applications to
identify susceptibility to what is commonly referred to as the "Y2K Issue"
whereby certain computer programs have been written using two digits rather than
four to define the applicable year. Any of PSI's computer programs or hardware
with the Y2K Issue that have date-sensitive applications or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000,
resulting in miscalculations or system failure causing disruptions of
operations.
9
<PAGE>
Many of PSI's critical applications, relative to the direct management of
properties, have recently been replaced and PSI believes they are already Year
2000 compliant. PSI has an implementation in process on the remaining critical
applications, including its general ledger and related systems, that are
believed to have Y2K Issues. PSI expects the implementation to be complete by
June 1999. Contingency plans have been developed for use in case PSI's
implementations are not completed on a timely basis. While PSI presently
believes that the impact of the Y2K Issue on its systems can be mitigated, if
the plan for ensuring Year 2000 compliance and the related contingency plans
were to fail, be insufficient, or not be implemented on a timely basis,
operations of the Partnership could be materially impacted.
Certain of PSI's other non-computer related systems that may be impacted by
the Y2K Issue, such as security systems, are currently being evaluated, and PSI
expects the evaluation to be completed by June 1999. PSI expects the
implementation of any required solutions to be complete in advance of December
31, 1999. PSI has not fully evaluated the impact of lack of Year 2000 compliance
on these systems, but has no reason to believe that lack of compliance would
materially impact the operations of the Partnership.
The Partnership exchanges electronic data with certain outside vendors in
the banking and payroll processing areas. PSI has been advised by these vendors
that their systems are or will be Year 2000 compliant, but has requested a Year
2000 compliance certification from these entities. PSI is not aware of any other
vendors, suppliers, or other external agents with a Y2K Issue that would
materially impact the Partnership's results of operations, liquidity, or capital
resources. However, PSI has no means of ensuring that external agents will be
Year 2000 compliant, and there can be no assurance that the Partnership has
identified all such external agents. The inability of external agents to
complete their Year 2000 compliance process in a timely fashion could materially
impact the Partnership. The effect of non-compliance by external agents is not
determinable.
The total cost of PSI's Year 2000 compliance activities (which primarily
consists of the costs of new systems) will be allocated to all entities that use
the PSI computer systems. The amount to be allocated to the Partnership is
estimated at approximately $132,000. These costs are capitalized.
The costs of the projects and the date on which PSI believes that it will
be Year 2000 compliant are based upon management's best estimates, and were
derived utilizing numerous assumptions of future events. There can be no
assurance that these estimates will be achieved, and actual results could differ
materially from those anticipated. There can be no assurance that PSI has
identified all potential Y2K Issues either within PSI and the Partnership or at
external agents. In addition, the impact of the Y2K Issue on governmental
10
<PAGE>
entities and utility providers and the resultant impact on the Partnership, as
well as disruptions in the general economy, may be material but cannot be
reasonably determined or quantified.
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, 1998
PS PARTNERS IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
--------------------------------------------
John Reyes
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000748901
<NAME> PS PARTNERS IV, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,401,000
<SECURITIES> 0
<RECEIVABLES> 89,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,490,000
<PP&E> 61,146,000
<DEPRECIATION> (24,199,000)
<TOTAL-ASSETS> 60,647,000
<CURRENT-LIABILITIES> 1,406,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,097,000
<TOTAL-LIABILITY-AND-EQUITY> 60,647,000
<SALES> 0
<TOTAL-REVENUES> 10,313,000
<CGS> 0
<TOTAL-COSTS> 3,745,000
<OTHER-EXPENSES> 1,881,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,903,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,903,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,903,000
<EPS-PRIMARY> 13.55
<EPS-DILUTED> 13.55
</TABLE>
