10-Q 1 0001.txt 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 June 30, 2000 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 June 30, 2000 and December 31, 1999 2 Condensed statements of income for the three and six months ended June 30, 2000 and 1999 3 Condensed statement of partners' equity for the six months ended June 30, 2000 4 Condensed statements of cash flows for the six months ended June 30, 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
June 30, December 31, 2000 1999 ---------------- ---------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 290,000 $ 249,000 Marketable securities of affiliate (cost of $6,340,000 at June 30, 2000 and $6,091,000 at December 31, 1999) 9,210,000 8,666,000 Rent and other receivables 145,000 389,000 Real estate facilities, at cost: Buildings and equipment 16,909,000 16,797,000 Land 5,021,000 5,244,000 ---------------- ---------------- 21,930,000 22,041,000 Less accumulated depreciation (13,298,000) (12,815,000) ---------------- ---------------- 8,632,000 9,226,000 Other assets 108,000 113,000 ---------------- ---------------- Total assets $ 18,385,000 $ 18,643,000 ================ ================ LIABILITIES AND PARTNERS' EQUITY -------------------------------- Accounts payable $ 284,000 $ 177,000 Deferred revenue 285,000 240,000 Note payable to commercial bank 10,725,000 14,050,000 Partners' equity: Limited partners' equity, $500 per unit, 40,000 units authorized, issued and outstanding 3,131,000 1,188,000 General partners' equity 1,090,000 413,000 Other comprehensive income 2,870,000 2,575,000 ---------------- ---------------- Total partners' equity 7,091,000 4,176,000 ---------------- ---------------- Total liabilities and partners' equity $ 18,385,000 $ 18,643,000 ================ ================
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------ 2000 1999 2000 1999 ------------- ------------- ------------- ------------- REVENUES: Rental income $ 2,356,000 $ 2,295,000 $ 4,692,000 $ 4,534,000 Dividends from marketable securities of affiliate 91,000 84,000 182,000 168,000 Gain on sale of land 61,000 - 61,000 - Other income 1,000 1,000 2,000 4,000 ------------- ------------- ------------- ------------- 2,509,000 2,380,000 4,937,000 4,706,000 ------------- ------------- ------------- ------------- COSTS AND EXPENSES: Cost of operations 573,000 517,000 1,102,000 1,054,000 Management fees paid to affiliate 141,000 138,000 281,000 272,000 Depreciation 242,000 247,000 483,000 493,000 Administrative 33,000 19,000 63,000 46,000 Interest expense 184,000 270,000 388,000 554,000 ------------- ------------- ------------- ------------- 1,173,000 1,191,000 2,317,000 2,419,000 ------------- ------------- ------------- ------------- NET INCOME $ 1,336,000 $ 1,189,000 $ 2,620,000 $ 2,287,000 ============= ============= ============= ============= Limited partners' share of net income ($64.77 per unit in 2000 and $56.55 per unit in 1999) $ 2,591,000 $ 2,262,000 General partners' share of net income 29,000 25,000 ------------- ------------- $ 2,620,000 $ 2,287,000 ============= =============
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 - - 295,000 295,000 Net income 2,591,000 29,000 - 2,620,000 Equity transfer (648,000) 648,000 - - ----------------- ----------------- ----------------- ----------------- Balance at June 30, 2000 $ 3,131,000 $ 1,090,000 $ 2,870,000 $ 7,091,000 ================= ================= ================= =================
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES IV, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, -------------------------------- 2000 1999 ------------- ------------- Cash flows from operating activities: Net income $ 2,620,000 $ 2,287,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 483,000 493,000 Gain on sale of land (61,000) - (Increase) decrease in rent and other receivables (5,000) 3,000 Amortization of prepaid loan fees 1,000 - Decrease in other assets 4,000 4,000 Increase in accounts payable 107,000 21,000 Increase in deferred revenue 45,000 39,000 ------------- ------------- Total adjustments 574,000 560,000 ------------- ------------- Net cash provided by operating activities 3,194,000 2,847,000 ------------- ------------- Cash flows from investing activities: Proceeds from sale of land 305,000 - Additions to real estate facilities (133,000) (144,000) ------------- ------------- Net cash provided by (used in) investing activities 172,000 (144,000) ------------- ------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (3,325,000) (2,910,000) ------------- ------------- Net cash used in financing activities (3,325,000) (2,910,000) ------------- ------------- Net increase (decrease) in cash and cash equivalents 41,000 (207,000) Cash and cash equivalents at beginning of period 249,000 433,000 ------------- ------------- Cash and cash equivalents at end of period $ 290,000 $ 226,000 ============= ============= Supplemental schedule of non-cash activities: Receipt of stock dividend: Marketable securities $ 249,000 $ - ============= ============= Rent and other receivables $ (249,000) $ - ============= ============= Increase in fair market value of marketable securities: Marketable securities $ 295,000 $ 358,000 ============= ============= Other comprehensive income $ 295,000 $ 358,000 ============= =============
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, 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 June 30, 2000, the results of its operations for the six months ended June 30, 2000 and 1999 and its cash flows for the six months then ended. 3. The results of operations for the six months ended June 30, 2000 are not necessarily indicative of the results expected for the full year. 4. Marketable securities at June 30, 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 June 30, 2000, we have recorded the marketable securities at fair value, based upon the closing quoted prices of the securities at June 30, 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 (7.35% at June 30, 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. 6 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 $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 our interest coverage ratio (5.82% as of June 30, 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 June 30, 2000, the unrealized gain on the interest rate swap, if required to be liquidated, was approximately $35,000. 6. We sold during May 2000 excess land adjacent to one of our operating properties for $305,000. This resulted in a gain of $61,000 being realized in the second quarter of 2000. 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 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 AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 1999: Our net income for the six months ended June 30, 2000 was $2,620,000 compared to $2,287,000 for the six months ended June 30, 1999, representing an increase of $333,000 or 15%. Our net income for the three months ended June 30, 2000 was $1,336,000 compared to $1,189,000 for the three months ended June 30, 1999, representing an increase of $147,000 or 12%. 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 six months ended June 30, 2000 was $4,692,000 compared to $4,534,000 for the six months ended June 30, 1999, representing an increase of $158,000 or 3%. Rental income for the three months ended June 30, 2000 was $2,356,000 compared to $2,295,000 for the three months ended June 30, 1999, representing an increase of $61,000 or 3%. These increases are primarily attributable to higher rental rates at our mini-warehouse facilities. The weighted average occupancy levels at the mini-warehouse facilities were 93% for each of the six months ended June 30, 2000 and 1999 respectively. Annual realized rent for the six months ended June 30, 2000 increased to $11.51 per occupied square foot from $11.05 per occupied square foot for the six months ended June 30, 1999. Interest and other income decreased $2,000 for the six months ended June 30, 2000 compared to the same period in 1999. 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 increased $14,000 for the six months ended June 30, 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. Cost of operations (including management fees paid to affiliate) for the six months ended June 30, 2000 was $1,383,000 compared to $1,326,000 for the six months ended June 30, 1999, representing an increase of $57,000 or 4%. Cost of operations (including management fees paid to affiliate) for the three months ended June 30, 2000 was $714,000 compared to $655,000 for the three months ended June 30, 1999, representing an increase of $59,000 or 9%. This increase is mainly attributable to increases in advertising and promotion expenses, tenant and legal settlements, and repairs and maintenance expense. Interest expense was $388,000 in the six months ended June 30, 2000 compared to $554,000 in the same period in 1999, a $166,000 or 30% decrease. This decrease is mainly attributable to a lower outstanding principal balance. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Cash flows from operating activities ($3,194,000 for the six months ended June 30, 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 (7.35% at June 30, 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 $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 our interest coverage ratio (5.82% as of June 30, 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 June 30, 2000, the unrealized gain on the interest rate swap, if required to be liquidated, was approximately $35,000. 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: (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: August 11, 2000 PUBLIC STORAGE PROPERTIES IV, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes -------------- John Reyes Senior Vice President and Chief Financial Officer 10