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, 2001
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
- ---------------------------------------- ----------
(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 X No
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INDEX
Page
PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 2001
and December 31, 2000 2
Condensed statements of income for the three and
nine months ended September 30, 2001 and 2000 3
Condensed statement of partners' equity for the
nine months ended September 30, 2001 4
Condensed statements of cash flows for the
nine months ended September 30, 2001 and 2000 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
September 30, December 31,
2001 2000
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(Unaudited)
ASSETS
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Cash and cash equivalents $ 594,000 $ 525,000
Marketable securities of affiliate (cost of $6,340,000) 13,084,000 9,566,000
Rent and other receivables 413,000 151,000
Real estate facilities, at cost:
Buildings and equipment 17,515,000 17,087,000
Land 5,021,000 5,021,000
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22,536,000 22,108,000
Less accumulated depreciation (14,502,000) (13,777,000)
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8,034,000 8,331,000
Other assets 79,000 102,000
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Total assets $ 22,204,000 $ 18,675,000
================ ================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 488,000 $ 169,000
Deferred revenue 225,000 262,000
Note payable to commercial bank 2,075,000 7,750,000
Partners' equity:
Limited partners' equity, $500 per unit, 40,000 units
authorized, issued and outstanding 9,399,000 5,391,000
General partners' equity 3,273,000 1,877,000
Other comprehensive income 6,744,000 3,226,000
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Total partners' equity 19,416,000 10,494,000
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Total liabilities and partners' equity $ 22,204,000 $ 18,675,000
================ ================
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
REVENUES:
Rental income $ 3,206,000 $ 2,422,000 $ 8,447,000 $ 7,114,000
Dividends from marketable securities of affiliate 314,000 321,000 497,000 503,000
Gain on sale of land - - - 61,000
Other income 2,000 4,000 30,000 6,000
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3,522,000 2,747,000 8,974,000 7,684,000
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COSTS AND EXPENSES:
Cost of operations 965,000 539,000 2,077,000 1,641,000
Management fees paid to affiliate 167,000 146,000 476,000 427,000
Depreciation 245,000 241,000 725,000 724,000
Administrative 24,000 17,000 74,000 80,000
Interest expense 35,000 164,000 218,000 552,000
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1,436,000 1,107,000 3,570,000 3,424,000
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NET INCOME $ 2,086,000 $ 1,640,000 $ 5,404,000 $ 4,260,000
============= ============= ============= =============
Limited partners' share of net income ($133.60 per
unit in 2001 and $105.33 per unit in 2000) $ 5,344,000 $ 4,213,000
General partners' share of net income 60,000 47,000
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$ 5,404,000 $ 4,260,000
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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, 2000 $ 5,391,000 $ 1,877,000 $ 3,226,000 $ 10,494,000
Change in unrealized gain of marketable
equity securities - - 3,518,000 3,518,000
Net income 5,344,000 60,000 - 5,404,000
Equity transfer (1,336,000) 1,336,000 - -
----------------- ----------------- ----------------- -----------------
Balance at September 30, 2001 $ 9,399,000 $ 3,273,000 $ 6,744,000 $ 19,416,000
================= ================= ================= =================
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
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2001 2000
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Cash flows from operating activities:
Net income $ 5,404,000 $ 4,260,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 725,000 721,000
Gain on sale of land - (61,000)
Increase in rent and other receivables (262,000) (184,000)
Amortization of prepaid loan fees 10,000 3,000
Decrease in other assets 13,000 7,000
Increase in accounts payable 319,000 187,000
(Decrease) increase in deferred revenue (37,000) 39,000
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Total adjustments 768,000 712,000
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Net cash provided by operating activities 6,172,000 4,972,000
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Cash flows from investing activities:
Proceeds from sale of land - 305,000
Additions to real estate facilities (428,000) (244,000)
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Net cash (used in) provided by investing activities (428,000) 61,000
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Cash flows from financing activities:
Principal payments on note payable to commercial bank (5,675,000) (4,375,000)
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Net cash used in financing activities (5,675,000) (4,375,000)
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Net increase in cash and cash equivalents 69,000 658,000
Cash and cash equivalents at beginning of period 525,000 249,000
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Cash and cash equivalents at end of period $ 594,000 $ 907,000
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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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Increase in fair market value of marketable securities:
Marketable securities $ 3,518,000 $ 516,000
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Other comprehensive income $ 3,518,000 $ 516,000
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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, 2000.
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, 2001, the results of its operations for the
three and nine months ended September 30, 2001 and 2000 and its cash
flows for the nine months then ended.
3. The results of operations for the three and nine months ended September
30, 2001 are not necessarily indicative of the results expected for the
full year.
4. Marketable securities at September 30, 2001 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 September
30, 2001, we have recorded the marketable securities at fair value,
based upon the closing quoted prices of the securities at September 28,
2001. 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 (3.35% at September 30,
2001). 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.
6
6. In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments
and Hedging Activities," as amended in June 2000 by Statement of
Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," which
requires companies to recognize all derivatives as either assets or
liabilities in the balance sheet and measure such instruments at fair
value. As amended by Statement of Financial Accounting Standards No.
137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133,"
the provisions of SFAS 133 will require adoption by the Partnership on
January 1, 2001. The Partnership adopted SFAS 133, as amended by SFAS
138, on January 1, 2001, and the adoption had no material impact on the
Partnership's consolidated financial statements.
7. During the third quarter of 2001, the property manager changed its
lease agreements in regards to collecting rent. New tenants are now
required to pay rent in arrears as opposed to paying in advance.
Primarily as a result of this change, rent and other receivables
increased $262,000 and deferred revenue decreased $37,000 from December
31, 2000.
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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 AND NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2000:
Our net income for the nine months ended September 30, 2001 was
$5,404,000 compared to $4,260,000 for the nine months ended September 30, 2000,
representing an increase of $1,144,000 or 27%. Our net income for the three
months ended September 30, 2001 was $2,086,000 compared to $1,640,000 for the
three months ended September 30, 2000, representing an increase of $446,000 or
27%. These increases are primarily a result of increased operating results at
our real estate facilities and a decrease in interest expense.
Rental income for the nine months ended September 30, 2001 was
$8,447,000 compared to $7,114,000 for the nine months ended September 30, 2000,
representing an increase of $1,333,000 or 19%. Rental income for the three
months ended September 30, 2001 was $3,206,000 compared to $2,422,000 for the
three months ended September 30, 2000, representing an increase of $784,000 or
32%. These increases are primarily attributable to higher rental rates. The
weighted average occupancy levels at the mini-warehouse facilities were 92% and
94% for the nine months ended September 30, 2001 and 2000, respectively. Annual
realized rent for the nine months ended September 30, 2001 increased to $14.09
per occupied square foot from $11.69 per occupied square foot for the nine
months ended September 30, 2000.
8
Cost of operations (including management fees paid to an affiliate) for
the nine months ended September 30, 2001 was $2,553,000 compared to $2,068,000
for the nine months ended September 30, 2000, representing an increase of
$485,000 or 23%. Cost of operations (including management fees paid to an
affiliate) for the three months ended September 30, 2001 was $1,132,000 compared
to $685,000 for the three months ended September 30, 2000, representing an
increase of $447,000 or 65%. This increase is mainly attributable to increases
in advertising and promotion expense, and payroll expense.
During 2001, we began offering containerized storage at one of our
facilities. As a result, we have experienced an increase in both rental income
and cost of operations, however, there has been no material impact to net
operating income contribution from this property.
Interest expense was $218,000 in the nine months ended September 30,
2001 compared to $552,000 in the same period in 2000, a $334,000 or 61%
decrease. This decrease is mainly attributable to a lower outstanding principal
balance.
LIQUIDITY AND CAPITAL RESOURCES
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Cash flows from operating activities ($6,172,000 for the nine months
ended September 30, 2001) 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 (3.35% at September 30, 2001). 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.
During the third quarter of 2001, the property manager changed its
lease agreements in regards to collecting rent. New tenants are now required to
pay rent in arrears as opposed to paying in advance. Primarily as a result of
this change, rent and other receivables increased $262,000 and deferred revenue
decreased $37,000 from December 31, 2000.
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:
None
(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: November 13, 2001
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