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, 1999
-------------
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 balance sheets at June 30, 1999
and December 31, 1998 2
Condensed statements of income for the three
and six months ended June 30, 1999 and 1998 3
Condensed statements of cash flows for the
six months ended June 30, 1999 and 1998 4
Notes to condensed financial statements 5
Management's discussion and analysis of financial condition
and results of operations 6-11
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 BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $1,340,000 $3,414,000
Rent and other receivables 1,000 2,000
Real estate facility, at cost:
Land 101,000 101,000
Buildings and equipment 1,535,000 1,534,000
----------------------------------
1,636,000 1,635,000
Less accumulated depreciation (681,000) (647,000)
----------------------------------
955,000 988,000
Investment in real estate entities 15,511,000 16,115,000
Other assets 5,000 5,000
----------------------------------
$17,812,000 $20,524,000
==================================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $124,000 $122,000
Advance payments from renters 12,000 12,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 17,417,000 20,103,000
General partner's equity 259,000 287,000
----------------------------------
Total partners' equity 17,676,000 20,390,000
----------------------------------
$17,812,000 $20,524,000
==================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------
1999 1998 1999 1998
----------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $76,000 $74,000 $148,000 $141,000
Equity in earnings of real estate entities 766,000 654,000 1,428,000 1,168,000
Interest income 12,000 30,000 48,000 51,000
----------------------------------------------------------------
854,000 758,000 1,624,000 1,360,000
----------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 30,000 26,000 61,000 55,000
Management fees 5,000 4,000 9,000 8,000
Depreciation and amortization 17,000 17,000 34,000 33,000
Administrative 60,000 65,000 83,000 84,000
----------------------------------------------------------------
112,000 112,000 187,000 180,000
----------------------------------------------------------------
NET INCOME $742,000 $646,000 $1,437,000 $1,180,000
================================================================
Limited partners' share of net income
($7.90 per unit in 1999 and
$8.35 per unit in 1998) $1,011,000 $1,069,000
General partner's share of net income 426,000 111,000
-----------------------------------
$1,437,000 $1,180,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------
1999 1998
---------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $1,437,000 $1,180,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 34,000 33,000
Decrease in rent and other receivables 1,000 -
Increase in other assets - (1,000)
Increase (decrease) in accounts payable 2,000 (30,000)
Increase in advance payments from renters - 2,000
Equity in earnings of real estate entities (1,428,000) (1,168,000)
---------------------------------
Total adjustments (1,391,000) (1,164,000)
---------------------------------
Net cash provided by operating activities 46,000 16,000
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from real estate entities 2,032,000 2,109,000
Additions to real estate facility (1,000) (9,000)
---------------------------------
Net cash provided by investing activities 2,031,000 2,100,000
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (4,151,000) (1,000,000)
---------------------------------
Net cash used in financing activities (4,151,000) (1,000,000)
---------------------------------
Net (decrease) increase in cash and cash equivalents (2,074,000) 1,116,000
Cash and cash equivalents at the beginning of the period 3,414,000 1,293,000
---------------------------------
Cash and cash equivalents at the end of the period $1,340,000 $2,409,000
=================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS IV, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(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, 1998.
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, 1999, the results of operations for the three and
six months ended June 30, 1999 and 1998 and cash flows for the six
months then ended.
3. The results of operations for the three and six months ended June 30,
1999 are not necessarily indicative of the results to be expected for
the full year.
4. In January 1997, the Joint Venture, PSI, and other related partnerships
transferred a total of 35 business parks to PS Business Parks, LP
("PSBPLP"), an operating partnership formed to own and operate business
parks in which PSI has a significant interest. Included among the
properties transferred were the Joint Venture's business parks in
exchange for a partnership interest in PSBPLP. The general partners of
PSBPLP is PS Business Parks, Inc.
5. Summarized combined financial data with respect to the Real Estate
Entities is as follows:
Six Months Ended June 30,
-----------------------------------
1999 1998
----------- -----------
Total revenues................... $67,305,000 $43,223,000
Minority interest in income...... $6,400,000 $5,683,000
Net income....................... $21,125,000 $12,544,000
5
<PAGE>
PS PARTNERS 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 MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998:
The Partnership's net income for the three months ended June 30, 1999
was $742,000 compared to $646,000 for the three months ended June 30, 1998,
representing an increase of $96,000, or 15%. The increase was primarily due to
the Partnership's share of improved property operations at the real estate
facilities that the Partnership has an interest in, combined with a decrease in
depreciation expense allocated to the Partnership with respect to the Joint
Venture.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse
property was $76,000 compared to $74,000 for the three months ended June 30,
1999 and 1998, respectively, representing an increase of $2,000, or 3%. Cost of
operations (including management fees) increased $5,000, or 17%, to $35,000 from
$30,000 for the three months ended June 30, 1999 and 1998, respectively.
Accordingly, for the Partnership's wholly-owned mini-warehouse property,
property net operating income decreased by $3,000, or 7%, from $44,000 to
$41,000 for the three months ended June 30, 1998 and 1999, respectively.
6
<PAGE>
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $766,000 in the three
months ended June 30, 1999 as compared to $654,000 during the three months ended
June 30, 1998, representing an increase of $112,000, or 17%. This was due
primarily to the Partnership's share of improved operating results at the Joint
Venture's mini-warehouses, combined with a decrease in depreciation expense
allocated to the Partnership with respect to the Joint Venture.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization remained stable at $17,000 for the three
months ended June 30, 1998 and 1999.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998:
The Partnership's net income for the six months ended June 30, 1999 was
$1,437,000 compared to $1,180,000 for the six months ended June 30, 1998,
representing an increase of $257,000, or 22%. The increase was primarily due to
the Partnership's share of improved property operations at the real estate
facilities in which the Partnership has an interest, combined with a decrease in
depreciation expense allocated to the Partnership with respect to the Joint
Venture.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse
property was $148,000 compared to $141,000 for the six months ended June 30,
1999 and 1998, respectively, representing an increase of $7,000, or 5%. Cost of
operations (including management fees) increased $7,000, or 11%, to $70,000 from
$63,000 for the six months ended June 30, 1999 and 1998, respectively.
Accordingly, for the Partnership's wholly-owned mini-warehouse property,
property net operating income remained stable at $78,000 for the six months
ended June 30, 1998 and 1999.
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $1,428,000 in the six
months ended June 30, 1999 as compared to $1,168,000 during the six months ended
June 30, 1998, representing an increase of $260,000, or 22%. This was due
7
<PAGE>
primarily to the Partnership's share of improved operating results at the Joint
Venture's mini-warehouses, combined with a decrease in depreciation expense
allocated to the Partnership with respect to the Joint Venture.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization increased $1,000 from $33,000 to $34,000
for the six months ended June 30, 1998 and 1999, respectively.
SUPPLEMENTAL PROPERTY DATA
- --------------------------
Most of the Partnership's net income is from the Partnership's share of
the operating results of the Mini-Warehouse Properties. Therefore, in order to
evaluate the Partnership's operating results, the General Partners analyze the
operating performance of the Mini-Warehouse Properties.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998:
Rental income for the Mini-Warehouse Properties was $3,286,000 compared
to $3,208,000 for the three months ended June 30, 1999 and 1998, respectively,
representing an increase of $78,000, or 2%. The increase in rental income was
primarily attributable to increased rental rates at the Mini-Warehouse
Properties. The monthly average realized rent per square foot for the
Mini-Warehouse Properties was $.66 compared to $.65 for the three months ended
June 30, 1999 and 1998, respectively. The weighted average occupancy levels at
the Mini-Warehouse Properties remained stable at 91% for the three months ended
June 30, 1998 and 1999. Cost of operations (including management fees) decreased
$42,000, or 3%, to $1,212,000 from $1,254,000 for the three months ended June
30, 1999 and 1998, respectively. This decrease was primarily attributable to a
decrease in property tax expenses, partially offset by increases in repairs and
maintenance and advertising and promotion (due primarily to the PSI national
telephone reservation center) expenses. Accordingly, for the Mini-Warehouse
Properties, property net operating income increased by $120,000, or 6%, from
$1,954,000 to $2,074,000 for the three months ended June 30, 1998 and 1999,
respectively.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998:
Rental income for the Mini-Warehouse Properties was $6,492,000 compared
to $6,271,000 for the six months ended June 30, 1999 and 1998, respectively,
representing an increase of $221,000, or 4%. The increase in rental income was
primarily attributable to increased rental rates at the Mini-Warehouse
Properties. The monthly average realized rent per square foot for the
Mini-Warehouse Properties was $.66 compared to $.64 for the six months ended
8
<PAGE>
June 30, 1999 and 1998, respectively. The weighted average occupancy levels at
the Mini-Warehouse Properties remained stable at 90% for the six months ended
June 30, 1998 and 1999. Cost of operations (including management fees) increased
$48,000, or 2%, to $2,475,000 from $2,427,000 for the six months ended June 30,
1999 and 1998, respectively. This increase was primarily attributable to
increases in repairs and maintenance, advertising and promotion (due primarily
to the PSI national telephone reservation center) and payroll expenses,
partially offset by a decrease in property tax expenses. Accordingly, for the
Mini-Warehouse Properties, property net operating income increased by $173,000,
or 5%, from $3,844,000 to $4,017,000 for the six months ended June 30, 1998 and
1999, respectively.
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
and distributions from real estate entities ($2,078,000 for the six months ended
June 30, 1999) has been sufficient to meet all current obligations of the
Partnership.
During 1999, the Partnership does not anticipate incurring significant
costs for capital improvements to the Partnership's wholly-owned property. Total
capital improvements for the six months ended June 30, 1999 with respect to this
property was $1,000.
The Partnership paid distributions to the limited and general partners
totaling $3,698,000 ($28.89 per unit) and $453,000, respectively, during the
first six months of 1999. Included in these distributions were special
distributions of a portion of the Partnership's operating reserve to the limited
and general partners totaling $2,807,000 ($21.93 per unit) and $345,000,
respectively. 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 Year 2000
- -------------------
The Partnership utilizes Public Storage, Inc.'s ("PSI") information
systems in connection with a cost sharing and administrative services agreement.
PSI 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>
PSI has two phases in its process with respect to each of its systems;
i) assessment, whereby PSI evaluates whether the system is Y2K compliant and
identifies the plan of action with respect to remediating any Y2K issues
identified and ii) implementation, whereby PSI completes the plan of action
prepared in the assessment phase and verifies that Y2K compliance has been
achieved.
Implementations have been completed on PSI's critical applications that
impact the Partnership, such as the general ledger, property operations, and
related systems. Contingency plans have been developed for use in case PSI's
assessment may have not been able to identify all Y2K issues, or if the
implementations were subsequently determined to not fully remediate Y2K issues
that were identified. While PSI presently believes that the impact of the Y2K
Issue on its systems can be mitigated, if PSI's plan for ensuring Year 2000
compliance and the related contingency plans were to fail, be insufficient, or
not be implemented on a timely basis, Partnership operations 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, have been evaluated. PSI
expects the implementation of the required solutions to be completed in advance
of December 31, 1999. Based upon its evaluation, PSI has no reason to believe
that lack of compliance or failure of required solutions would materially impact
the Partnership's operations.
The Partnership exchanges electronic data with certain outside vendors
in the banking and payroll processing areas. The Partnership 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. The
Partnership 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, the Partnership has no
means of ensuring that external agents will be Year 2000 compliant, and there
can be no assurance that PSI 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 cost of PSI's year 2000 compliance activities (which primarily
consists of the costs of new systems) to be allocated to the Partnership is
estimated at approximately $148,000. These costs are capitalized. PSI's year
2000 compliance efforts have not resulted in any significant deferrals in other
information system projects.
The costs of the projects and the date on which PSI expects to achieve
Year 2000 Compliance are based upon management's best estimates, and were
derived utilizing numerous assumptions of future events. There can be no
10
<PAGE>
assurance that these estimates will be achieved, and actual results could differ
materially from those anticipated. There can be no assurance that PSI has
identified all potential Y2K Issues either within the Partnership, at PSI or at
external agents. In addition, the impact of the Y2K issue on governmental
entities and utility providers and the resultant impact on the Partnership, as
well as disruptions in the general economy, may be material but cannot be
reasonably determined or quantified.
11
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are included herein:
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: August 12, 1999
PS PARTNERS IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
--------------------------------------------
John Reyes
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000748901
<NAME> PS PARTNERS IV, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S.$
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,340,000
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,341,000
<PP&E> 1,636,000
<DEPRECIATION> (681,000)
<TOTAL-ASSETS> 17,812,000
<CURRENT-LIABILITIES> 136,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,676,000
<TOTAL-LIABILITY-AND-EQUITY> 17,812,000
<SALES> 0
<TOTAL-REVENUES> 1,624,000
<CGS> 0
<TOTAL-COSTS> 70,000
<OTHER-EXPENSES> 117,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,437,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,437,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,437,000
<EPS-BASIC> 7.90
<EPS-DILUTED> 7.90
</TABLE>
