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
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Commission File Number 0-8908
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PUBLIC STORAGE PROPERTIES IV, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3192402
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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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
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INDEX
Page
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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
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(Unaudited)
ASSETS
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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
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22,076,000 22,041,000
Less accumulated depreciation (13,056,000) (12,815,000)
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9,020,000 9,226,000
Other assets 112,000 113,000
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Total assets $ 17,762,000 $ 18,643,000
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LIABILITIES AND PARTNERS' EQUITY
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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
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Total partners' equity 4,810,000 4,176,000
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Total liabilities and partners' equity $ 17,762,000 $ 18,643,000
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See accompanying notes.
2
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
-----------------------------------
2000 1999
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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
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2,428,000 2,326,000
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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
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1,144,000 1,228,000
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NET INCOME $ 1,284,000 $ 1,098,000
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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
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$ 1,284,000 $ 1,098,000
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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.
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PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
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2000 1999
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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
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Total adjustments 293,000 241,000
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Net cash provided by operating activities 1,577,000 1,339,000
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Cash flows from investing activities:
Additions to real estate facilities (35,000) (55,000)
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Net cash used in investing activities (35,000) (55,000)
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Cash flows from financing activities:
Principal payments on note payable to commercial bank (1,575,000) (1,500,000)
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Net cash used in financing activities (1,575,000) (1,500,000)
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Net decrease in cash and cash equivalents (33,000) (216,000)
Cash and cash equivalents at beginning of period 249,000 433,000
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Cash and cash equivalents at end of period $ 216,000 $ 217,000
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Supplemental schedule of non-cash activities:
Receipt of stock dividend:
Marketable securities $ 249,000 $ -
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Rent and other receivables $ (249,000) $ -
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Decrease in fair market value of marketable securities:
Marketable securities $ (650,000) $ (788,000)
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Other comprehensive income $ (650,000) $ (788,000)
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See accompanying notes.
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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.
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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.
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PUBLIC STORAGE PROPERTIES IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
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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
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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
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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
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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.
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(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
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John Reyes
Senior Vice President and
Chief Financial Officer
10