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, 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 September 30, 1999
and December 31, 1998 2
Condensed statements of income for the three
and nine months ended September 30, 1999 and 1998 3
Condensed statements of cash flows for the
nine months ended September 30, 1999 and 1998 4
Notes to condensed financial statements 5
Management's discussion and analysis of financial condition
and results of operations 6-10
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 11
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-----------------------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $2,462,000 $3,414,000
Rent and other receivables 2,000 2,000
Real estate facility, at cost:
Land 101,000 101,000
Buildings and equipment 1,536,000 1,534,000
-----------------------------------
1,637,000 1,635,000
Less accumulated depreciation (698,000) (647,000)
-----------------------------------
939,000 988,000
Investment in real estate entities 14,702,000 16,115,000
Other assets 3,000 5,000
-----------------------------------
$18,108,000 $20,524,000
===================================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $148,000 $122,000
Advance payments from renters 11,000 12,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 17,687,000 20,103,000
General partner's equity 262,000 287,000
-----------------------------------
Total partners' equity 17,949,000 20,390,000
-----------------------------------
$18,108,000 $20,524,000
===================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $83,000 $82,000 $231,000 $223,000
Equity in earnings of real estate entities 761,000 695,000 2,189,000 1,863,000
Interest income 23,000 40,000 71,000 91,000
-------------------------------------------------------------------
867,000 817,000 2,491,000 2,177,000
-------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 37,000 31,000 98,000 86,000
Management fees 5,000 6,000 14,000 14,000
Depreciation and amortization 17,000 16,000 51,000 49,000
Administrative 36,000 41,000 119,000 125,000
-------------------------------------------------------------------
95,000 94,000 282,000 274,000
-------------------------------------------------------------------
NET INCOME $772,000 $723,000 $2,209,000 $1,903,000
===================================================================
Limited partners' share of net income
($13.49 per unit in 1999 and
$13.55 per unit in 1998) $1,727,000 $1,735,000
General partner's share of net income 482,000 168,000
-----------------------------------
$2,209,000 $1,903,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1999 1998
-------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $2,209,000 $1,903,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 51,000 49,000
Increase in rent and other receivables - (6,000)
Decrease in other assets 2,000 -
Increase (decrease) in accounts payable 26,000 (4,000)
Decrease in advance payments from renters (1,000) -
Equity in earnings of real estate entities (2,189,000) (1,863,000)
-------------------------------------
Total adjustments (2,111,000) (1,824,000)
-------------------------------------
Net cash provided by operating activities 98,000 79,000
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from real estate entities 3,602,000 3,173,000
Additions to real estate facility (2,000) (10,000)
-------------------------------------
Net cash provided by investing activities 3,600,000 3,163,000
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (4,650,000) (1,500,000)
-------------------------------------
Net cash used in financing activities (4,650,000) (1,500,000)
-------------------------------------
Net (decrease) increase in cash and cash equivalents (952,000) 1,742,000
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 $2,462,000 $3,035,000
=====================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS IV, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 1999, the results of operations for the three
and nine months ended September 30, 1999 and 1998 and cash flows for
the nine months then ended.
3. The results of operations for the three and nine months ended September
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 partner of
PSBPLP is PS Business Parks, Inc.
5. Summarized combined financial data with respect to the Real Estate
Entities is as follows:
Nine Months Ended September 30,
-------------------------------
1999 1998
------------- ------------
Total revenues....................... $104,130,000 $72,973,000
Minority interest in income.......... $10,769,000 $8,696,000
Net income........................... $32,541,000 $22,987,000
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 SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998:
The Partnership's net income for the three months ended September 30,
1999 was $772,000 compared to $723,000 for the three months ended September 30,
1998, representing an increase of $49,000, or 7%. 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, offset by decreased interest income.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse
property was $83,000 compared to $82,000 for the three months ended September
30, 1999 and 1998, respectively, representing an increase of $1,000, or 1%. Cost
of operations (including management fees) increased $5,000, or 14%, to $42,000
from $37,000 for the three months ended September 30, 1999 and 1998,
respectively. Accordingly, for the Partnership's wholly-owned mini-warehouse
property, property net operating income decreased by $4,000, or 9%, from $45,000
to $41,000 for the three months ended September 30, 1998 and 1999, respectively.
6
<PAGE>
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $761,000 in the three
months ended September 30, 1999 as compared to $695,000 during the three months
ended September 30, 1998, representing an increase of $66,000, or 9%. 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 increased $1,000 from $16,000 to $17,000
for the three months ended September 30, 1998 and 1999, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998:
The Partnership's net income for the nine months ended September 30,
1999 was $2,209,000 compared to $1,903,000 for the nine months ended September
30, 1998, representing an increase of $306,000, or 16%. 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, offset by
decreased interest income and decreased depreciation allocated to the
Partnership with respect to the Joint Venture.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse
property was $231,000 compared to $223,000 for the nine months ended September
30, 1999 and 1998, respectively, representing an increase of $8,000, or 4%. Cost
of operations (including management fees) increased $12,000, or 12%, to $112,000
from $100,000 for the nine months ended September 30, 1999 and 1998,
respectively. Accordingly, for the Partnership's wholly-owned mini-warehouse
property, property net operating income decreased by $4,000, or 3%, from
$123,000 to $119,000 for the nine months ended September 30, 1998 and 1999,
respectively.
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $2,189,000 in the nine
months ended September 30, 1999 as compared to $1,863,000 during the nine months
ended September 30, 1998, representing an increase of $326,000, or 17%. This was
due primarily to the Partnership's share of improved operating results at the
7
<PAGE>
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 $2,000, or 4%, from $49,000 to
$51,000 for the nine months ended September 30, 1998 and 1999, respectively.
This increase was primarily attributable to the depreciation of capital
expenditures made during 1998 and 1999.
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 SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998:
Rental income for the Mini-Warehouse Properties was $3,394,000 compared
to $3,342,000 for the three months ended September 30, 1999 and 1998,
respectively, representing an increase of $52,000, or 2%. The increase in rental
income was primarily attributable to increased rental rates at the
Mini-Warehouse Properties, partially offset by decreased average occupancy
rates. The annual average realized rent per square foot for the Mini-Warehouse
Properties was $8.17 compared to $7.98 for the three months ended September 30,
1999 and 1998, respectively. The weighted average occupancy levels at the
Mini-Warehouse Properties decreased from 92% to 91% for the three months ended
September 30, 1998 and 1999, respectively. Cost of operations (including
management fees) decreased $23,000, or 2%, to $1,295,000 from $1,318,000 for the
three months ended September 30, 1999 and 1998, respectively. This decrease is
primarily attributable to lower property tax expenses. Accordingly, for the
Mini-Warehouse Properties, property net operating income increased by $75,000,
or 4%, from $2,024,000 to $2,099,000 for the three months ended September 30,
1998 and 1999, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998:
Rental income for the Mini-Warehouse Properties was $9,886,000 compared
to $9,613,000 for the nine months ended September 30, 1999 and 1998,
respectively, representing an increase of $273,000, or 3%. The increase in
rental income was primarily attributable to increased rental rates at the
Mini-Warehouse. The annual average realized rent per square foot for the
Mini-Warehouse Properties was $8.01 compared to $7.78 for the nine months ended
September 30, 1999 and 1998, respectively. The weighted average occupancy levels
8
<PAGE>
at the Mini-Warehouse Properties remained stable at 90% for the nine months
ended September 30, 1998 and 1999. Cost of operations (including management
fees) increased $25,000, or 1%, to $3,770,000 from $3,745,000 for the nine
months ended September 30, 1999 and 1998, respectively. This increase was
primarily attributable to increases in advertising and promotion (due primarily
to the PSI national telephone reservation center) and repairs and maintenance
expenses, offset by lower property tax expenses. Accordingly, for the
Mini-Warehouse Properties, property net operating income increased by $248,000,
or 4%, from $5,868,000 to $6,116,000 for the nine months ended September 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 ($3,700,000 for the nine months
ended September 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 for the Partnership's wholly-owned property.
Total capital improvements for the nine months ended September 30, 1999 with
respect to this property was $2,000.
The Partnership paid distributions to the limited and general partners
totaling $4,143,000 ($32.38 per unit) and $507,000, respectively, during the
first nine months of 1999. 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
- -----------------------------
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.
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
9
<PAGE>
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. 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 Year 2000 compliant. 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 $148,000. These costs are capitalized. PSI's year
2000 compliance efforts have not resulted in any significant deferrals in other
information system projects.
The costs of the projects and the date on which PSI expects to achieve
Year 2000 Compliance are based upon management's best estimates, and were
derived utilizing numerous assumptions of future events. There can be no
assurance that these estimates will be achieved, and actual results could differ
materially from those anticipated. There can be no assurance that PSI has
identified all potential Y2K Issues either within the Partnership, at PSI or at
external agents. In addition, the impact of the Y2K issue on governmental
entities and utility providers and the resultant impact on the Partnership, as
well as disruptions in the general economy, may be material but cannot be
reasonably determined or quantified.
10
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are included herein:
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: November 12, 1999
PS PARTNERS IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
---------------------------------------------
John Reyes
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000748901
<NAME> PS PARTNERS IV, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S.$
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,462,000
<SECURITIES> 0
<RECEIVABLES> 2,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,464,000
<PP&E> 1,637,000
<DEPRECIATION> (698,000)
<TOTAL-ASSETS> 18,108,000
<CURRENT-LIABILITIES> 159,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,949,000
<TOTAL-LIABILITY-AND-EQUITY> 18,108,000
<SALES> 0
<TOTAL-REVENUES> 2,491,000
<CGS> 0
<TOTAL-COSTS> 112,000
<OTHER-EXPENSES> 170,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,209,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,209,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,209,000
<EPS-BASIC> 13.49
<EPS-DILUTED> 13.49
</TABLE>
