-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K0kp/scYGH/Q5vtYDtLVB9Qj2AXmScmAcSKuiPBygGR4BNf/UFhIZ2unVaP6VH0N +/iMWJaO9owwXociYiocZw== 0000225775-99-000004.txt : 19990517 0000225775-99-000004.hdr.sgml : 19990517 ACCESSION NUMBER: 0000225775-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC STORAGE PROPERTIES IV LTD CENTRAL INDEX KEY: 0000225775 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 953192402 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08908 FILM NUMBER: 99623830 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: 8182448080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 10-Q 1 10-Q 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, 1999 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 X No --- --- INDEX Page ---- PART I. FINANCIAL INFORMATION Condensed balance sheets at March 31, 1999 and December 31, 1998 2 Condensed statements of income for the three months ended March 31, 1999 and 1998 3 Condensed statement of partners' deficit for the three months ended March 31, 1999 4 Condensed statements of cash flows for the three months ended March 31, 1999 and 1998 5 Notes to condensed financial statements 6-7 Management's discussion and analysis of financial condition and results of operations 8-11 PART II. OTHER INFORMATION 12 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED BALANCE SHEETS
March 31, December 31, 1999 1998 ----------------- ----------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 217,000 $ 433,000 Marketable securities of affiliate (cost of $6,091,000) 9,549,000 10,337,000 Rent and other receivables 119,000 136,000 Real estate facilities, at cost: Buildings and equipment 16,479,000 16,424,000 Land 5,244,000 5,244,000 ----------------- ----------------- 21,723,000 21,668,000 Less accumulated depreciation (12,070,000) (11,824,000) ----------------- ----------------- 9,653,000 9,844,000 Other assets 126,000 126,000 ----------------- ----------------- Total assets $ 19,664,000 $ 20,876,000 ================= ================= LIABILITIES AND PARTNERS' EQUITY -------------------------------- Accounts payable $ 193,000 $ 249,000 Deferred revenue 269,000 235,000 Note payable to commercial bank 18,150,000 19,650,000 Partners' equity: Limited partners' deficit, $500 per unit, 40,000 units Authorized, issued and outstanding (1,785,000) (2,599,000) General partners' deficit (621,000) (905,000) Other comprehensive income 3,458,000 4,246,000 ----------------- ----------------- Total partners' equity 1,052,000 742,000 ----------------- ----------------- Total liabilities and partners' equity $ 19,664,000 $ 20,876,000 ================= =================
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, ------------------------------------ 1999 1998 -------------- -------------- REVENUES: Rental income $ 2,239,000 $ 2,110,000 Dividends from marketable securities of affiliate 84,000 84,000 Interest and other income 3,000 30,000 -------------- -------------- 2,326,000 2,224,000 -------------- -------------- COSTS AND EXPENSES: Cost of operations 537,000 522,000 Management fees paid to affiliate 134,000 127,000 Depreciation 246,000 230,000 Administrative 27,000 15,000 Interest expense 284,000 686,000 -------------- -------------- 1,228,000 1,580,000 -------------- -------------- NET INCOME $ 1,098,000 $ 644,000 ============== ============== Limited partners' share of net income ($27.15 per unit in 1999 and $15.93 per unit in 1998) $ 1,086,000 $ 637,000 General partners' share of net income 12,000 7,000 -------------- -------------- $ 1,098,000 $ 644,000 ============== ==============
See accompanying notes. 3 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
Other Total Limited General Comprehensive Partners' Partners Partners Income Equity --------------- --------------- --------------- --------------- Balance at December 31, 1998 $ (2,599,000) $ (905,000) $ 4,246,000 $ 742,000 Unrealized loss marketable securities - - (788,000) (788,000) Net income 1,086,000 12,000 - 1,098,000 Equity transfer (272,000) 272,000 - - --------------- --------------- --------------- --------------- Balance at March 31, 1999 $ (1,785,000) $ (621,000) $ 3,458,000 $ 1,052,000 =============== =============== =============== ===============
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ------------------------------------- 1999 1998 --------------- --------------- Cash flows from operating activities: Net income $ 1,098,000 $ 644,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 246,000 230,000 Decrease in rent and other receivables 17,000 6,000 Amortization of prepaid loan fees - 23,000 Increase in other assets - (3,000) (Decrease) increase in accounts payable (56,000) 52,000 Increase in deferred revenue 34,000 48,000 --------------- --------------- Total adjustments 241,000 356,000 --------------- --------------- Net cash provided by operating activities 1,339,000 1,000,000 --------------- --------------- Cash flows from investing activities: Additions to real estate facilities (55,000) (32,000) --------------- --------------- Net cash used in investing activities (55,000) (32,000) --------------- --------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (1,500,000) - Principal payments on mortgage note payable - (249,000) --------------- --------------- Net cash used in financing activities (1,500,000) (249,000) --------------- --------------- Net (decrease) increase in cash and cash equivalents (216,000) 719,000 Cash and cash equivalents at beginning of period 433,000 1,911,000 --------------- --------------- Cash and cash equivalents at end of period $ 217,000 $ 2,630,000 =============== =============== Supplemental schedule of non-cash investing and financing activities: Decrease (increase) in fair market value of marketable securities $ 788,000 $ (573,000) =============== =============== Unrealized (loss) gain on marketable securities $ (788,000) $ 573,000 =============== ===============
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, 1998. 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, 1999, the results of its operations for the three months ended March 31, 1999 and 1998 and its cash flows for the three months then ended. 3. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results expected for the full year. 4. Marketable securities at March 31, 1999 consist of 381,980 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 March 31, 1999, the Partnership has recorded the marketable securities at fair value, based upon the closing quoted prices of the securities at March 31, 1999. 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. On July 1, 1998, the Partnership paid off the mortgage note payable with cash reserves and with the proceeds of a $22,000,000 loan from Public Storage, Inc., a general partner of the Partnership. The loan from Public Storage, Inc. required for monthly payments of interest only at the fixed rate of 7.2% and matures June 30, 1999. The loan to PSI was paid off in September 1998 with the proceeds of a loan from a commercial bank (see note 6). 6 6. During September 1998, the Partnership borrowed $21,000,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.60% to 1.20% depending on the Partnership's interest coverage ratio (5.60% at March 31, 1999). 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. The loan proceeds were used to pay off the Partnership's note payable to Public Storage, Inc. The Partnership has 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 $7,500,000 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 the Partnership's interest coverage ratio (5.82% as of March 31, 1999). Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. The Partnership records the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of March 31, 1999, the unrealized loss on the interest rate swap, if required to be liquidated, was approximately $5,000. 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's 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, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998: The Partnership's net income for the three months ended March 31, 1999 was $1,098,000 compared to $644,000 for the three months ended March 31, 1998, representing an increase of $454,000 or 70%. The increase is primarily a result of increased operating results at the Partnership's mini-warehouse facilities combined with decreased interest expense. Rental income for the three months ended March 31, 1999 was $2,239,000 compared to $2,110,000 for the three months ended March 31, 1998, representing an increase of $129,000 or 6%. This increase is primarily attributable to increased rental rates at the Partnership's mini-warehouse facilities. The weighted average occupancy levels at the mini-warehouse facilities were 93% and 94% for the three months ended March 31, 1999 and 1998, respectively. Average monthly realized rent per occupied square foot increased from $.85 for the three months ended March 31, 1998 to $.91 for the three months ended March 31, 1999. Interest and other income decreased $27,000 for the three months ended March 31, 1999 compared to the same period in 1998. The decrease is primarily a result of the increase in the pay down of the Partnership note payable, which resulted in lower cash balances and consequently less interest earned. 8 Dividend income from marketable securities of affiliate remained stable for the three months ended March 31, 1999 compared to the same period in 1998. Cost of operations (including management fees paid to affiliate) for the three months ended March 31, 1999 was $671,000 compared to $649,000 for the three months ended March 31, 1998, representing an increase of $22,000 or 3%. This increase is mainly attributable to increases in advertising and promotion expenses. Interest expense was $284,000 in the three months ended March 31, 1999 from $686,000 in the same period in 1998, a $402,000 or 58.6% decrease. This decrease is mainly attributable to a lower outstanding principal balance and reduced interest rates on the Partnership's debt resulting from a refinancing of the Partnership's debt. See Liquidity and Capital Resources for a discussion of the refinancing of the Partnership's indebtedness in the third quarter of 1998. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flows from operating activities ($1,339,000 for the three months ended March 31, 1999) have been sufficient to meet all current obligations of the Partnership. At March 31, 1999, the Partnership held 381,980 shares of common stock with a fair value totaling $9,549,000 (cost basis of $6,091,000 at March 31, 1999) in Public Storage, Inc. The Partnership recognized $84,000 in dividends for the three months ended March 31, 1999. On July 1, 1998, the Partnership paid off the mortgage note payable with cash reserves and with the proceeds of a $22,000,000 loan from Public Storage, Inc., a general partner of the Partnership. The loan from Public Storage, Inc. required for monthly payments of interest only at the fixed rate of 7.2% and matures June 30, 1999. The loan to PSI was paid off in September 1998 with the proceeds of a loan from a commercial bank (see note 6). During September 1998, the Partnership borrowed $21,000,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.60% to 1.20% depending on the Partnership's interest coverage ratio (5.60% at March 31, 1999). 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. The loan proceeds were used to pay off the Partnership's note to Public Storage, Inc. The Partnership has 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 $7,500,000 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 9 1.20% based on the Partnership's interest coverage ratio (5.82% as of March 31, 1999). Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. The Partnership records the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of March 31, 1999, the unrealized loss on the interest rate swap, if required to be liquidated, was approximately $5,000. Year 2000 System Issues - ----------------------- The Partnership utilizes PSI's information systems in connection with a cost sharing and administrative services agreement. PSI has completed an assessment of all of its hardware and software applications to identify susceptibility to what is commonly referred to as the "Y2K Issue" whereby certain computer programs have been written using two digits rather than four to define the applicable year. Any of PSI's computer programs or hardware with the Y2K Issue that have date-sensitive applications or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000, resulting in miscalculations or system failure causing disruptions of operations. PSI has two phases in its process with respect to each of its systems; i) assessment, whereby PSI evaluates whether the system is Y2K compliant and identifies the plan of action with respect to remediating any Y2K issues identified and ii) implementation, whereby PSI completes the plan of action prepared in the assessment phase and verifies that Y2K compliance has been achieved. Many of PSI's critical applications, relative to the direct management of properties, have recently been replaced and PSI believes they are already Year 2000 compliant. PSI has an implementation in process on the remaining critical applications, including its general ledger and related systems that are believed to have Y2K issues. PSI expects the implementation to be complete by June 1999. Contingency plans have been developed for use in case PSI's implementations are not completed on a timely basis. While PSI presently believes that the impact of the Y2K Issue on its systems can be mitigated, if PSI's plan for ensuring Year 2000 Compliance and the related contingency plans were to fail, be insufficient, or not be implemented on a timely basis, Partnership operations could be materially impacted. Certain of PSI's other non-computer related systems that may be impacted by the Y2K Issue, such as security systems, are currently being evaluated, and PSI expects the evaluation to be complete by June 1999. PSI expects the implementation of any required solutions to be complete in advance of December 31, 1999. PSI has not fully evaluated the impact of lack of Year 2000 compliance on these systems, but has no reason to believe that lack of compliance would materially impact the Partnership's operations. 10 The Partnership exchanges electronic data with certain outside vendors in the banking and payroll processing areas. The Partnership has been advised by these vendors that their systems are or will be Year 2000 compliant, but has requested a Year 2000 compliance certification from these entities. The Partnership is not aware of any other vendors, suppliers, or other external agents with a Y2K Issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant, and there can be no assurance that the Company has identified all such external agents. The inability of external agents to complete their Year 2000 compliance process in a timely fashion could materially impact the Partnership. The effect of non-compliance by external agents is not determinable. The cost of the PSI's Year 2000 compliance activities (which primarily consists of the costs of new systems) to be allocated to the Partnership is estimated at approximately $76,143. These costs are capitalized. PSI's Year 2000 compliance efforts have not resulted in any significant deferrals in other information system projects. The costs of the projects and the date on which PSI and the Partnership expect to achieve Year 2000 Compliance are based upon management's best estimates, and were derived utilizing numerous assumptions of future events. There can be no assurance that these estimates will be achieved, and actual results could differ materially from those anticipated. There can be no assurance that the Partnership or PSI has identified all potential Y2K Issues either within the Partnership, at PSI, or at external agents. In addition, the impact of the Y2K issue on governmental entities and utility providers and the resultant impact on the Partnership, as well as disruptions in the general economy, may be material but cannot be reasonably determined or quantified. 11 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: May 14, 1999 PUBLIC STORAGE PROPERTIES IV, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes -------------------------- John Reyes Senior Vice President and Chief Financial Officer 12 EX-27 2 FDS --
5 0000225775 Public Storage Properties IV, Ltd. 1 US 3-MOS Dec-31-1999 Jan-01-1999 Mar-31-1999 1 217,000 9,549,000 119,000 0 0 10,011,000 21,723,000 (12,070,000) 19,664,000 462,000 0 18,150,000 0 0 1,052,000 19,664,000 0 2,326,000 0 671,000 273,000 0 284,000 1,098,000 0 1,098,000 0 0 0 1,098,000 27.15 27.15
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