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, 1996
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 X No
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INDEX
Page
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PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 1996
and December 31, 1995 2
Condensed statements of income for the three and nine
months ended September 30, 1996 and 1995 3
Condensed statement of partners' deficit for the
nine months ended September 30, 1996 4
Condensed statements of cash flows for the
nine months ended September 30, 1996 and 1995 5
Notes to condensed financial statements 6-7
Management's discussion and analysis of
financial condition and results of operations 8-10
PART II. OTHER INFORMATION 11
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED BALANCE SHEETS
September 30, December 31,
1996 1995
-------------------- ------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 2,268,000 $ 967,000
Marketable securities of affiliate
(cost of $3,791,000 in 1996 and 1995) 6,722,000 5,645,000
Rent and other receivables 128,000 100,000
Real estate facilities, at cost:
Buildings and equipment 15,337,000 15,015,000
Land 5,244,000 5,244,000
-------------------- ------------------
20,581,000 20,259,000
Less accumulated depreciation (9,805,000) (9,203,000)
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10,776,000 11,056,000
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Other assets 292,000 599,000
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Total assets $ 20,186,000 $ 18,367,000
==================== ==================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 200,000 $ 81,000
Deferred revenue 235,000 244,000
Mortgage note payable 26,556,000 27,178,000
Partners' deficit:
Limited partners' deficit, $500 per
unit, 40,000 units authorized,
issued and outstanding (7,222,000) (8,152,000)
General partners' deficit (2,514,000) (2,838,000)
Unrealized gain on marketable securities 2,931,000 1,854,000
-------------------- ------------------
Total partners' deficit (6,805,000) (9,136,000)
-------------------- ------------------
Total liabilities and partners' deficit $ 20,186,000 $ 18,367,000
==================== ==================
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine months Ended
September 30, September 30,
------------------------------------- --------------------------------------
1996 1995 1996 1995
----------------- ----------------- ------------------ ------------------
(Restated)
REVENUE:
Rental income $ 1,868,000 $ 1,798,000 $ 5,490,000 $ 5,257,000
Dividends from marketable
securities of affiliate 65,000 60,000 196,000 181,000
Other income 26,000 16,000 58,000 320,000
----------------- ----------------- ------------------ ------------------
1,959,000 1,874,000 5,744,000 5,758,000
----------------- ----------------- ------------------ ------------------
COSTS AND EXPENSES:
Cost of operations 460,000 429,000 1,356,000 1,315,000
Management fees paid to affiliate 105,000 108,000 303,000 316,000
Depreciation 207,000 187,000 602,000 548,000
Administrative 20,000 20,000 47,000 55,000
Environmental cost - - - 25,000
Interest expense 722,000 747,000 2,182,000 2,255,000
----------------- ----------------- ------------------ ------------------
1,514,000 1,491,000 4,490,000 4,514,000
----------------- ----------------- ------------------ ------------------
NET INCOME $ 445,000 $ 383,000 $ 1,254,000 $ 1,244,000
================= ================= ================== ==================
Limited partners' share of net income
($31.00 per unit in 1996 and $30.75
per unit in 1995) $ 1,240,000 $ 1,230,000
General partners' share of net income 14,000 14,000
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$ 1,254,000 $ 1,244,000
================== ==================
See accompanying notes.
3
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENT OF PARTNERS' DEFICIT
(UNAUDITED)
Unrealized
Gain on Total
Limited General Marketable Partners'
Partners Partners Securities Deficit
----------------- ------------------ ----------------- -----------------
Balance at December 31, 1995 ($8,152,000) ($2,838,000) $1,854,000 ($9,136,000)
Unrealized gain on marketable
securities - - 1,077,000 1,077,000
Net income 1,240,000 14,000 - 1,254,000
Equity transfer (310,000) 310,000 - -
----------------- ------------------ ----------------- -----------------
Balance at September 30, 1996 ($7,222,000) ($2,514,000) $2,931,000 ($6,805,000)
================= ================== ================= =================
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months Ended
September 30,
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1996 1995
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Cash flows from operating activities:
Net income $ 1,254,000 $ 1,244,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 602,000 549,000
Decrease in advances to reconstruct real estate facility - (236,000)
Increase in rent and other receivables (28,000) (21,000)
Decrease in other assets 42,000 67,000
Amortization of prepaid management fees 265,000 -
Increase in accounts payable 119,000 152,000
Decrease in deferred revenue (9,000) (53,000)
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Total adjustments 991,000 458,000
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Net cash provided by operating activities 2,245,000 1,702,000
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Cash flows from investing activities:
Expenditures to reconstruct damaged real estate facility - (1,000)
Additions to real estate facilities (322,000) (288,000)
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Net cash used in investing activities (322,000) (289,000)
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Cash flows from financing activities:
Principal payments on mortgage notes payable (622,000) (548,000)
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Net cash used in financing activities (622,000) (548,000)
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Net increase in cash and cash equivalents 1,301,000 865,000
Cash and cash equivalents at the beginning of the period 967,000 551,000
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Cash and cash equivalents at the end of the period $ 2,268,000 $ 1,416,000
==================== ==================
Supplemental schedule of noncash investing and financing activities:
Increase in fair value of marketable securities $ (1,077,000) $ (1,168,000)
==================== ==================
Unrealized gain on marketable securities 1,077,000 1,168,000
==================== ==================
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,
1995.
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, 1996, the results of its operations for the three and nine
months ended September 30, 1996 and 1995 and its cash flows for the nine
months then ended.
3. The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results expected for the full
year.
4. Certain prior year amounts have been reclassified to conform with the 1996
presentation.
5. Marketable securities at September 30, 1996 consist of 297,130 shares of
common stock of Public Storage, Inc., a publicly traded real estate
investment trust and a general partner of the Partnership. The Partnership
has designated its portfolio of marketable securities as available for
sale. Accordingly, at September 30, 1996, the Partnership has recorded the
marketable securities at fair value, based upon the closing quoted prices
of the securities at September 30, 1996, and a corresponding unrealized
gain totaling $1,077,000 as a credit to Partnership equity.
6
6. In 1995, the Partnership prepaid eight months of 1996 management fees at a
cost of $265,000. The amount has been amortized as management fees paid to
affiliate during the nine months ended September 30, 1996.
7. In 1993, the Partnership reached a settlement with its insurance carrier
for damage sustained to the property located in Miami, Florida from
Hurricane Andrew in August 1992 and for business interruption while the
facility was being reconstructed. The settlement provided for the payment
of $2,987,000 consisting of (i) reconstruction and related costs of the
facility and (ii) business interruption. The insurance proceeds received
with respect to reconstruction were recorded on the balance sheet as
"Advances to reconstruct real estate facility" and has been reduced by the
amount of actual costs paid with respect to the reconstruction of the
facility. The facility recommenced operations in October 1994 and the
reconstruction of the facility was completed in the second quarter of 1995.
The balance of $236,000 in Advances to Reconstruct Real Estate Facility was
recognized as income during the second quarter of 1995 and is included in
Other income on the Condensed Statements of Income.
7
PUBLIC STORAGE PROPERTIES IV, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1995:
The Partnership's net income for the nine months ended September 30, 1996
and 1995 was $1,254,000 and $1,244,000, respectively, representing a increase of
$10,000 or 1%. Net income for the three months ended September 30, 1996 and 1995
was $445,000 and $383,000, respectively, representing a increase of $62,000 or
16%. The increases in net income for both the three and nine months ended
September 30, 1996 is an increase in operating results at the Partnership's
mini-warehouse facilities combined with decreased interest expense.
Rental income was $5,490,000 compared to $5,257,000 for the nine months
ended September 30, 1996 and 1995, respectively, representing an increase of
$233,000 or 4%. Rental income was $1,868,000 compared to $1,798,000 for the
three months ended September 30, 1996 and 1995, respectively, representing an
increase of $70,000 or 4%. These increases are primarily attributable to
increases in rental rates and occupancy levels at the Partnership's
mini-warehouse facilities. The weighted average occupancy levels at the
mini-warehouse facilities were 89% and 86% for the nine months ended September
30, 1996 and 1995, respectively. Realized rent remained stable at $.78 per
occupied square foot for the nine months ended September 30, 1996 and 1995
respectively.
Other income decreased $262,000 for the nine months ended September 30,
1996 compared to the same period in 1995. The decrease in the nine months ended
September 30, 1996 over 1995 is due to the recognition of $236,000 in income
from unused insurance proceeds, combined with the recognition of $49,000 of
business interruption income in the first quarter of 1995. The $236,000 of
income is attributable to actual cost being lower than amounts received from
insurance proceeds to reconstruct a real estate facility located in Miami,
Florida, which was damaged by Hurricane Andrew in August 1992 (see Note 7 in the
Notes to Condensed Financial Statements). Other income increased $10,000 for the
three months ended September 30, 1996 over the same period in 1995. The increase
is due to an increase in invested cash balances.
8
Dividend income from marketable securities of affiliate increased $15,000
and $5,000 for the nine and three month periods ended September 30, 1996,
respectively, compared to the same periods in 1995. These increases are
attributable to an increase in the number of shares owned in 1996 compared to
the same periods in 1995.
Cost of operations (including management fees paid to affiliate) increased
28,000 or 2% to 1,659,000 from 1,631,000 for the nine months ended September 30,
1996 and 1995 respectively. This increase is mainly attributable to increases in
repairs and maintenance, and advertising expenses. Cost of operations (including
management fees paid to affiliate) increased $28,000 or 5% to $565,000 from
$537,000 for the three months ended September 30, 1996 and 1995, respectively.
These increases are mainly attributable to increases in payroll and advertising
and promotion costs, partially offset by decreases in management fees paid to an
affiliate.
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations (based on the management fees for the comparable
period during the calendar year immediately preceding the prepayment) discounted
at the rate of 14% per year to compensate for early payment. The Partnership has
expensed the prepaid management fees during the nine months ended September 30,
1996. The amount is shown as management fees paid to affiliate in the condensed
statements of income. As a result of the prepayment, the Partnership saved
approximately $26,000 in management fees, based on the management fees that
would have been payable on rental income generated in the nine months ended
September 30, 1996 compared to the amount prepaid.
Interest expense decreased $73,000 for the nine months ended September 30,
1996 compared to the same period in 1995 due to a lower outstanding loan balance
in 1996 over 1995.
In 1995, the Partnership incurred cost of $25,000 to conduct environmental
assessments of its properties to evaluate the environmental condition of and
potential environmental liabilities of such properties. Those assessments did
not indicate any environmental contamination of any of its property sites which
individually or in the aggregate would be material to the Partnership's overall
business, financial condition, or results of operations. No such cost was
incurred in 1996.
9
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operating activities ($2,245,000 for the nine months ended
September 30, 1996) have been sufficient to meet all current obligations of the
Partnership, including principal repayments of the Partnership's note payable.
At September 30, 1996, the Partnership held 297,130 shares of common stock
(marketable securities) with a fair value totaling $6,722,000 (cost basis of
$3,791,000 at September 30, 1996) in Public Storage, Inc. one of the general
partners in the Partnership. The Partnership recognized $196,000 in dividends or
the nine months ended September 30, 1996.
In the third quarter of 1991, quarterly distributions were discontinued to
enable the Partnership to make principal payments that commenced in 1990 and to
increase cash reserves in subsequent years through 1998, at which time the
remaining principal balance is due.
10
PART II. OTHER INFORMATION
Items 1 through 5 are inapplicable.
Item 6 Exhibits and Reports on Form 8-K.
(a) The following exhibit is 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: November 12, 1996
PUBLIC STORAGE PROPERTIES IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner, Jr.
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Ronald L. Havner, Jr.
Senior Vice President and Chief
Financial Officer
11