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 June 30, 1997
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
PART I. FINANCIAL INFORMATION
Condensed balance sheets at June 30, 1997
and December 31, 1996 2
Condensed statements of income for the three and
six months ended June 30, 1997 and 1996 3
Condensed statement of partners' deficit for the
six months ended June 30, 1997 4
Condensed statements of cash flows for the
six months ended June 30, 1997 and 1996 5
Notes to condensed financial statements 6
Management's discussion and analysis of
financial condition and results of operations 7-8
PART II. OTHER INFORMATION 9
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED BALANCE SHEETS
June 30, December 31,
1997 1996
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(Unaudited)
ASSETS
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Cash and cash equivalents $ 1,980,000 $ 2,440,000
Marketable securities of affiliate
(cost of $5,080,000 in 1997 and $3,791,000 in 1996) 10,076,000 9,211,000
Rent and other receivables 172,000 150,000
Real estate facilities, at cost:
Buildings and equipment 15,716,000 15,441,000
Land 5,244,000 5,244,000
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20,960,000 20,685,000
Less accumulated depreciation (10,449,000) (10,017,000)
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10,511,000 10,668,000
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Other assets 203,000 273,000
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Total assets $ 22,942,000 $ 22,742,000
================= =================
LIABILITIES AND PARTNERS' DEFICIT
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Accounts payable $ 93,000 $ 52,000
Deferred revenue 244,000 224,000
Mortgage note payable 25,884,000 26,338,000
Partners' deficit:
Limited partners' deficit, $500 per unit, 40,000 units
authorized, issued and outstanding (6,138,000) (6,892,000)
General partners' deficit (2,137,000) (2,400,000)
Unrealized gain on marketable securities 4,996,000 5,420,000
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Total partners' deficit (3,279,000) (3,872,000)
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Total liabilities and partners' deficit $ 22,942,000 $ 22,742,000
================= =================
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- --------------- --------------
REVENUES:
Rental income $ 1,954,000 $ 1,839,000 $ 3,871,000 $ 3,622,000
Dividends from marketable securities of affiliate 76,000 66,000 141,000 131,000
Other income 33,000 18,000 68,000 32,000
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2,063,000 1,923,000 4,080,000 3,785,000
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COSTS AND EXPENSES:
Cost of operations 463,000 448,000 953,000 896,000
Management fees paid to affiliate 117,000 99,000 232,000 198,000
Depreciation 217,000 198,000 432,000 395,000
Administrative 20,000 17,000 31,000 27,000
Interest expense 705,000 727,000 1,415,000 1,460,000
-------------- -------------- --------------- --------------
1,522,000 1,489,000 3,063,000 2,976,000
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NET INCOME $ 541,000 $ 434,000 $ 1,017,000 $ 809,000
============== ============== ============== ==============
Limited partners' share of net income ($25.13 per
unit in 1997 and $20.00 per unit in 1996) $ 1,005,000 $ 800,000
General partners' share of net income 12,000 9,000
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$ 1,017,000 $ 809,000
=============== ==============
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, 1996 $(6,892,000) $(2,400,000) $5,420,000 $(3,872,000)
Unrealized loss on marketable securities - - (424,000) (424,000)
Net income 1,005,000 12,000 - 1,017,000
Equity transfer (251,000) 251,000 - -
-------------- -------------- --------------- --------------
Balance at June 30, 1997 $(6,138,000) $(2,137,000) $4,996,000 $(3,279,000)
============== ============== =============== ==============
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES IV, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
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1997 1996
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Cash flows from operating activities:
Net income $ 1,017,000 $ 809,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 432,000 395,000
Increase in rent and other receivables (22,000) (10,000)
Amortization of prepaid loan fees 46,000 46,000
Decrease (increase) in other assets 24,000 (11,000)
Amortization of prepaid management fees - 198,000
Increase in accounts payable 41,000 22,000
Increase in deferred revenue 20,000 30,000
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Total adjustments 541,000 670,000
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Net cash provided by operating activities 1,558,000 1,479,000
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Cash flows from investing activities:
Purchase of marketable securities of affiliate (1,289,000) -
Additions to real estate facilities (275,000) (177,000)
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Net cash used in investing activities (1,564,000) (177,000)
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Cash flows from financing activities:
Principal payments on mortgage note payable (454,000) (409,000)
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Net cash used in financing activities (454,000) (409,000)
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Net (decrease) increase in cash and cash equivalents (460,000) 893,000
Cash and cash equivalents at beginning of period 2,440,000 967,000
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Cash and cash equivalents at end of period $ 1,980,000 $ 1,860,000
=================== ====================
Supplemental schedule of non-cash investing
and financing activities:
Decrease (increase) in fair market value of marketable securities $ 424,000 $ (483,000)
=================== ====================
Unrealized (loss) gain on marketable securities $ (424,000) $ 483,000
=================== ====================
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,
1996.
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 June 30, 1997, the results of its operations for the three and six
months ended June 30, 1997 and 1996 and its cash flows for the six months
then ended.
3. The results of operations for the three and six months ended June 30, 1997
are not necessarily indicative of the results expected for the full year.
4. Marketable securities at June 30, 1997 consist of 344,480 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 June 30, 1997, the Partnership has recorded the marketable
securities at fair value, based upon the closing quoted prices of the
securities at June 30, 1997. 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.
6
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 SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE AND SIX MONTHS
ENDED JUNE 30, 1996:
The Partnership's net income for the six months ended June 30, 1997 was
$1,017,000 compared to $809,000 for the six months ended June 30, 1996,
representing an increase of $208,000 or 26%. The Partnership's net income for
the three months ended June 30, 1997 was $541,000 compared to $434,000 for the
three months ended June 30, 1996, representing an increase of $107,000 or 25%.
These increases are primarily a result of increased operating results at the
Partnership's real estate facilities combined with a decrease in interest
expense.
Rental income for the six months ended June 30, 1997 was $3,871,000
compared to $3,622,000 for the six months ended June 30, 1996 representing an
increase of $249,000 or 7%. Rental income for the three months ended June 30,
1997 was $1,954,000 compared to $1,839,000 for the three months ended June 30,
1996, representing an increase of $115,000 or 6%. These increases are primarily
attributable to higher rental rates and occupancy levels at the Partnership's
mini-warehouse facilities. The weighted average occupancy levels at the
mini-warehouse facilities were 91% and 87% for the six months ended June 30,
1997 and 1996, respectively. Realized rent for the six months ended June 30,
1997 increased to $.81 per occupied square foot from $.79 per occupied square
foot for the six months ended June 30, 1996.
Other income increased $36,000 for the six months ended June 30, 1997
compared to the same period in 1996. This increase is primarily due to an
increase in invested cash balances.
Dividend income from marketable securities of affiliate increased $10,000
for the six months ended June 30, 1997 compared to the same period in 1996 due
to an increase in the number of shares owned in 1997 compared to the same period
in 1996.
Cost of operations (including management fees paid to affiliate) for the
six months ended June 30, 1997 was $1,185,000 compared to $1,094,000 for the six
months ended June 30, 1996, representing an increase of $91,000 or 8%. Cost of
operations (including management fees paid to affiliate) for the three months
ended June 30, 1997 was $580,000 compared to $547,000 for the three months ended
June 30, 1996, representing an increase of $33,000 or 6%. This increase is
mainly attributable to increases in management fees, property taxes and payroll
expenses. Property taxes increased due to an increase in property tax rates at
some of the Partnership's mini-warehouse facilities.
7
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations discounted at the rate of 14% effective rate to
compensate for early payment. As a result, management fee expense for the six
months ended June 30, 1996 was $19,000 lower than it would have been under the
customary undiscounted fee structure.
Interest expense decreased $45,000 to $1,415,000 in the six months ended
June 30, 1997 from $1,460,000 in the same period in 1996. This decrease is
mainly attributable to a lower outstanding principal balances on the
Partnership's notes payable.
LIQUIDITY AND CAPITAL RESOURCES
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Cash flows from operating activities ($1,558,000 for the six months ended
June 30, 1997) have been sufficient to meet all current obligations of the
Partnership.
At June 30, 1997, the Partnership held 344,480 shares of common stock
(marketable securities) with a fair value totaling $10,076,000 (cost basis of
$5,080,000 at June 30, 1997) in Public Storage, Inc. From April through May
1997, the Partnership purchased an additional 47,350 shares of common stock in
Public Storage, Inc. at an aggregate cost of 1,289,000. The Partnership
recognized $141,000 in dividends for the six months ended June 30, 1997.
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.
8
PART II. OTHER INFORMATION
Items 1 through 4 are inapplicable.
Item 5 In May 1997, B. Wayne Hughes ("Hughes"), a general partner of the
Partnership, completed a cash tender offer, which commenced in March
1997, pursuant to which Hughes acquired a total of 5,033 limited
partnership units at $447 per Unit. Public Storage, inc. ("PSI"), the
other general partner of the Partnership, has an option to purchase
such 5,033 Units from Hughes, at Hughes' cost, at any time after May
2, 1998.
Item 6 Exhibits and Reports on Form 8-K.
--------------------------------
(a) The following exhibit is included herein:
(27) Financial Data Schedule
(b) Form 8-K
The Partnership filed a Current Report on Form 8-K dated May
2, 1997 (filed May 8, 1997), pursuant to Item 1, which stated
that as a result of B. Wayne Hughes' cash tender offer to
purchase limited partnership units in the Partnership
("Units") which was completed on May 2, 1997, as of May 2,
1997 B. Wayne Hughes and Public Storage, Inc., the general
partners of the Partnership, beneficially owned an aggregate
of 24,310 Units, representing 60.8% of the Units, and are in a
position to control all voting decisions with respect to the
Partnership.
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: August 12, 1997
PUBLIC STORAGE PROPERTIES IV, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
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John Reyes
Vice President and
Chief Financial Officer
9