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, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to --------------- --------------- Commission File Number 0-8908 ------ PUBLIC STORAGE PROPERTIES IV, LTD. ---------------------------------- (Exact name of registrant as specified in its charter) California 95-3192402 - ---------------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 701 Western Avenue Glendale, California 91201 - ---------------------------------------- ----- (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 No X --- --- INDEX Page ---- PART I. FINANCIAL INFORMATION Condensed balance sheets at March 31, 2000 and December 31, 1999 2 Condensed statements of income for the three months ended March 31, 2000 and 1999 3 Condensed statement of partners' equity for the three months ended March 31, 2000 4 Condensed statements of cash flows for the three months ended March 31, 2000 and 1999 5 Notes to condensed financial statements 6-7 Management's discussion and analysis of financial condition and results of operations 8-9 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K. 10 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED BALANCE SHEETS March 31, December 31, 2000 1999 ---------------- ---------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 216,000 $ 249,000 Marketable securities of affiliate (cost of $6,340,000 at March 31, 2000 and $6,091,000 at December 31, 1999) 8,265,000 8,666,000 Rent and other receivables 149,000 389,000 Real estate facilities, at cost: Buildings and equipment 16,832,000 16,797,000 Land 5,244,000 5,244,000 ---------------- ---------------- 22,076,000 22,041,000 Less accumulated depreciation (13,056,000) (12,815,000) ---------------- ---------------- 9,020,000 9,226,000 Other assets 112,000 113,000 ---------------- ---------------- Total assets $ 17,762,000 $ 18,643,000 ================ ================ LIABILITIES AND PARTNERS' EQUITY -------------------------------- Accounts payable $ 190,000 $ 177,000 Deferred revenue 287,000 240,000 Note payable to commercial bank 12,475,000 14,050,000 Partners' equity: Limited partners' equity, $500 per unit, 40,000 units authorized, issued and outstanding 2,140,000 1,188,000 General partners' equity 745,000 413,000 Other comprehensive income 1,925,000 2,575,000 ---------------- ---------------- Total partners' equity 4,810,000 4,176,000 ---------------- ---------------- Total liabilities and partners' equity $ 17,762,000 $ 18,643,000 ================ ================ See accompanying notes. 2 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, ----------------------------------- 2000 1999 ---------------- ---------------- REVENUES: Rental income $ 2,336,000 $ 2,239,000 Dividends from marketable securities of affiliate 91,000 84,000 Other income 1,000 3,000 ---------------- ---------------- 2,428,000 2,326,000 ---------------- ---------------- COSTS AND EXPENSES: Cost of operations 529,000 537,000 Management fees paid to affiliate 140,000 134,000 Depreciation 241,000 246,000 Administrative 30,000 27,000 Interest expense 204,000 284,000 ---------------- ---------------- 1,144,000 1,228,000 ---------------- ---------------- NET INCOME $ 1,284,000 $ 1,098,000 ================ ================ Limited partners' share of net income ($31.73 per unit in 2000 and $27.15 per unit in 1999) $ 1,269,000 $ 1,086,000 General partners' share of net income 15,000 12,000 ---------------- ---------------- $ 1,284,000 $ 1,098,000 ================ ================ See accompanying notes. 3 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENT OF PARTNERS' EQUITY (UNAUDITED) Other Limited General Comprehensive Total Partners' Partners Partners Income Equity ----------------- ----------------- ----------------- ----------------- Balance at December 31, 1999 $ 1,188,000 $ 413,000 $ 2,575,000 $ 4,176,000 Change in unrealized gain of marketable equity securities - - (650,000) (650,000) Net income 1,269,000 15,000 - 1,284,000 Equity transfer (315,000) 315,000 - - ----------------- ----------------- ----------------- ----------------- Balance at March 31, 2000 $ 2,142,000 $ 743,000 $ 1,925,000 $ 4,810,000 ================= ================= ================= ================= See accompanying notes. 4 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, -------------------------------- 2000 1999 ------------- ------------- Cash flows from operating activities: Net income $ 1,284,000 $ 1,098,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 241,000 246,000 (Increase) decrease in rent and other receivables (9,000) 17,000 Amortization of prepaid loan fees 1,000 - Increase (decrease) in accounts payable 13,000 (56,000) Increase in deferred revenue 47,000 34,000 ------------- ------------- Total adjustments 293,000 241,000 ------------- ------------- Net cash provided by operating activities 1,577,000 1,339,000 ------------- ------------- Cash flows from investing activities: Additions to real estate facilities (35,000) (55,000) ------------- ------------- Net cash used in investing activities (35,000) (55,000) ------------- ------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (1,575,000) (1,500,000) ------------- ------------- Net cash used in financing activities (1,575,000) (1,500,000) ------------- ------------- Net decrease in cash and cash equivalents (33,000) (216,000) Cash and cash equivalents at beginning of period 249,000 433,000 ------------- ------------- Cash and cash equivalents at end of period $ 216,000 $ 217,000 ============= ============= Supplemental schedule of non-cash activities: Receipt of stock dividend: Marketable securities $ 249,000 $ - ============= ============= Rent and other receivables $ (249,000) $ - ============= ============= Decrease in fair market value of marketable securities: Marketable securities $ (650,000) $ (788,000) ============= ============= Other comprehensive income $ (650,000) $ (788,000) ============= ============= See accompanying notes. 5 PUBLIC STORAGE PROPERTIES IV, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (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, 1999. 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 March 31, 2000, the results of its operations for the three months ended March 31, 2000 and 1999 and its cash flows for the three months then ended. 3. The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results expected for the full year. 4. Marketable securities at March 31, 2000 consist of 381,980 shares of common stock and 12,412 shares of Equity Stock, Series A of Public Storage, Inc., a publicly traded real estate investment trust and a general partner of the Partnership. We have designated our portfolio of marketable securities as available for sale. Accordingly, at March 31, 2000, we have recorded the marketable securities at fair value, based upon the closing quoted prices of the securities at March 31, 2000. Changes in market value of marketable securities are reflected as unrealized gains or losses directly in Partners' Equity and accordingly have no effect on net income. 5. During September 1998, we borrowed $21,000,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate, ("LIBOR") rounded up to the nearest .125% plus 0.60% to 1.20% depending on our interest coverage ratio (6.73% at March 31, 2000). The loan requires monthly payments of interest and mature September 2002. Principal may be paid, in whole or in part, at any time without penalty or premium. 6 5. (continued) We have entered into an interest rate swap agreement to reduce the impact of changes in interest rates on a portion of its floating rate debt. The agreement, which covers $11,500,000 of debt through March 2000 and $4,000,000 from March 2000 through September 2000, effectively changes the interest rate exposure from floating rate to a fixed rate of 5.22% plus 0.60% to 1.20% based on our interest coverage ratio (5.82% as of March 31, 2000). Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. We record the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of March 31, 2000, the unrealized gain on the interest rate swap, if required to be liquidated, was approximately $35,000. 7 PUBLIC STORAGE PROPERTIES 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 MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999: Our net income for the three months ended March 31, 2000 was $1,284,000 compared to $1,098,000 for the three months ended March 31, 1999, representing an increase of $186,000 or 17%. These increases are primarily a result of increased operating results at our real estate facilities and a decrease in interest expense resulting from our lower outstanding debt. Rental income for the three months ended March 31, 2000 was $2,336,000 compared to $2,239,000 for the three months ended March 31, 1999, representing an increase of $97,000 or 4%. These increases are primarily attributable to higher rental rates and higher occupancy levels at our mini-warehouse facilities. The weighted average occupancy levels at the mini-warehouse facilities were 94% and 93% for each of the three months ended March 31, 2000 and 1999 respectively. Annual realized rent for the three months ended March 31, 2000 increased to $11.33 per occupied square foot from $10.97 per occupied square foot for the three months ended March 31, 2000. Dividend income from marketable securities of affiliate increased $7,000 for the three months ended March 31, 2000 compared to the same period in 1999. The increase is equal to the dividends received on the Public Storage Equity Stock, Series A which we received as a stock dividend in January 2000. 8 Cost of operations (including management fees paid to affiliate) for the three months ended March 31, 2000 was $669,000 compared to $671,000 for the three months ended March 31, 1999, representing a decrease of $2,000. Interest expense decreased $80,000 to $204,000 in the three months ended March 31, 2000 from $284,000 in the same period in 1999. This decrease is mainly attributable to a lower outstanding principal balance. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flows from operating activities ($1,577,000 for the three months ended March 31, 2000) have been sufficient to meet all current obligations of the Partnership. During September 1998, we borrowed $21,000,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") rounded up to the nearest .125% plus 0.60% to 1.20% depending on our interest coverage ratio (6.73% at March 31, 2000). The loan requires monthly payments of interest and matures September 2002. Principal may be paid, in whole or in part, at any time without penalty or premium. We have entered into an interest rate swap agreement to reduce the impact of changes in interest rates on a portion of its floating rate debt. The agreement, which covers $11,500,000 of debt through March 2000 and $4,000,000 from March 2000 through September 2000, effectively changes the interest rate exposure from floating rate to a fixed rate of 5.22% plus 0.60% to 1.20% based on our interest coverage ratio (5.82% as of March 31, 2000). Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. We record the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of March 31, 2000, the unrealized gain on the interest rate swap, if required to be liquidated, was approximately $35,000. Year 2000 System Issues - ----------------------- The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date to the year 2000 has occurred and no Year 2000 Issues have been identified, it is not possible to conclude that all aspects of the Year 2000 Issue that may affect the entity, including those related to customers, suppliers, or other third parties, have been fully resolved. 9 PART II. OTHER INFORMATION Items 1 through 5 are inapplicable. Item 6 Exhibits and Reports on Form 8-K. --------------------------------- (a) The following exhibits are included herein: (27) Financial Data Schedule (b) 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: May 12, 2000 PUBLIC STORAGE PROPERTIES IV, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes -------------- John Reyes Senior Vice President and Chief Financial Officer 10