As filed with the Securities and Exchange Commission on May 12, 2000
File No. 0-30127
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
PS Orangeco, Inc.
(Exact name of registrant as specified in its charter)
California 95-4508588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Western Avenue
Glendale, California 91201-2349
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
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<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
Item 1. Business
The information required by this item is contained under "Summary,"
"Risk Factors," "Where You Can Find More Information," "Business of Orangeco"
and "Arrangements Between Orangeco and Public Storage" of the Information
Statement (the "Information Statement") attached hereto. Those sections are
incorporated herein by reference.
Item 2. Financial Information
The information required by this item is contained under
"Capitalization," "Selected Financial Information of Orangeco" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Orangeco" of the Information Statement.
Those sections are incorporated herein by reference.
Item 3. Properties
The information required by this item is contained under "Business of
Orangeco - Properties" of the Information Statement. That section is
incorporated herein by reference.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is contained under "Security
Ownership of Orangeco Common Stock by Certain Beneficial Owners and Management"
of the Information Statement. That section is incorporated herein by reference.
Item 5. Directors and Executive Officers
The information required by this item is contained under "Management of
Orangeco" of the Information Statement. That section is incorporated herein by
reference.
Item 6. Executive Compensation
The information required by this item is contained under "Management of
Orangeco" of the Information Statement. That section is incorporated herein by
reference.
Item 7. Certain Relationships and Related Transactions
The information required by this item is contained under "The
Distribution," "Business of Orangeco" and "Arrangements Between Orangeco and
Public Storage" of the Information Statement. Those sections are incorporated
herein by reference.
Item 8. Legal Proceedings
The information required by this item is contained under "Risk Factors"
and "Business of Orangeco - Legal Proceedings" of the Information Statement.
Those sections are incorporated herein by reference.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The information required by this item is contained under "The
Distribution," "Dividend Policy of Orangeco" and "Description of Orangeco
Capital Stock" of the Information Statement. Those sections are incorporated
herein by reference.
Item 10. Recent Sales of Unregistered Securities
None.
Item 11. Description of Registrant's Securities to be Registered
The information required by this item is contained under "Description
of Orangeco Capital Stock" of the Information Statement. That section is
incorporated herein by reference.
Item 12. Indemnification of Directors and Officers
The information required by this item is contained under "Liability of
Directors and Officers; Indemnification" of the Information Statement. That
section is incorporated herein by reference.
Item 13. Financial Statements and Supplementary Data
The information required by this item is contained under "Historical
and Pro Forma Financial Statements of Orangeco" of the Information Statement.
That section is incorporated herein by reference.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 15. Financial Statements and Exhibits
(a) Financial Statements
See Historical and Pro Forma Financial Statements of Orangeco in the
Information Statement
(b) Exhibits
Exhibit Number Description
-------------- -----------
2 Form of Distribution Agreement.(1)
3.1 Form of Restated Articles of Incorporation of
Registrant.(1)
3.2 Form of Restated Bylaws of Registrant.(1)
10.1 Registrant's 2000 Stock Option and Incentive
Plan.(1)
10.2 Agreement to Lease and to Complete Properties for
Lease.(1)
10.3 Intercompany Operating Agreement.(1)
10.4 Cost Sharing and Administrative Services Agreement
dated as of November 16, 1995 by and among PSCC,
Inc. and the owners listed therein.(2)
10.5 Form of Indemnity Agreement.(1)
27 Financial Data Schedule.(3)
---------------
(1) To be filed by amendment.
(2) Filed as exhibit 10.2 to the form 10-Q for the quarterly period
ended March 31, 1998 of PS Business Parks, Inc. (File No.
1-10709) and incorporated herein by reference.
(3) Filed herewith.
<PAGE>
INFORMATION STATEMENT
PS ORANGECO, INC.
Common Stock
Public Storage, Inc. is furnishing this information statement to you to
describe the distribution to you of 90.5% of the shares of PS Orangeco, Inc.
("Orangeco"). Public Storage will, at the time of the distribution, own all of
the shares of Orangeco and will, immediately following the distribution, own
9.5% of the shares of Orangeco.
o Public Storage expects to make the distribution on or about
__________, 2000, on the basis of one share of Orangeco common stock
for each 20 shares of Public Storage common stock held on __________,
2000.
o You will not have to pay for the shares of Orangeco common stock you
receive in the distribution.
o You will receive cash instead of a fractional interest in a share of
Orangeco common stock for any interest of less than one whole share of
Orangeco to which you would be entitled.
o You will not have to surrender or exchange shares of Public Storage
common stock to receive shares of Orangeco common stock.
There is no current trading market for the Orangeco common stock. We
have applied to have the Orangeco common stock quoted on the NASDAQ National
Market under the symbol "______".
As you review this information statement, you should carefully consider
the matters described in "Risk Factors" beginning on page 5.
-----------------------------
We are not asking you for a proxy and
you are requested not to send us a proxy.
-----------------------------
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved these securities
or determined if this Information Statement is accurate or
adequate.
-----------------------------
This Information Statement is not an offer to sell securities and
is not a solicitation of an offer to buy securities. Changes may
occur after the date of this Information Statement. Neither
Orangeco nor Public Storage will update the information in this
Information Statement, except in the normal course of their public
disclosures.
-----------------------------
If you have questions about the distribution, please contact
Public Storage's investor services department at [_______________]
or Public Storage's stock transfer agent and registrar,
BankBoston, N.A., at [_______________]. BankBoston, N.A. is also
acting as distribution agent for the distribution.
The date of this Information Statement is _______________, 2000.
<PAGE>
TABLE OF CONTENTS
Page
Summary..................................................................... 1
Public Storage......................................................... 1
Orangeco............................................................... 1
Address and Telephone Number........................................... 1
The Distribution....................................................... 2
Information Regarding the Distribution and Orangeco.................... 4
Risk Factors................................................................ 5
An active trading market for the Orangeco common stock may never
develop or be sustained............................................... 5
The distribution will be taxable to you without a corresponding
payment of cash....................................................... 5
Orangeco has a limited history in operating portable self-storage...... 5
Orangeco is dependent on Public Storage................................ 5
Orangeco has significant future capital requirements................... 5
Orangeco is subject to operating risks................................. 6
There is significant competition in Orangeco's businesses.............. 6
Orangeco may incur environmental costs and liabilities................. 6
There may be conflicts of interest following the distribution.......... 6
The Hughes family could control Orangeco............................... 6
Orangeco does not intend to pay dividends.............................. 6
About this Information Statement............................................ 7
Where You Can Find More Information......................................... 7
Cautionary Statement........................................................ 7
The Distribution............................................................ 8
Background and Reasons for the Distribution............................ 8
Manner of Effecting the Distribution................................... 8
Conditions; Termination................................................ 9
Valuation; Financial Advisor........................................... 9
Capitalization.............................................................. 9
Dividend Policy of Orangeco................................................. 10
Business of Orangeco........................................................ 10
Operation of Portable Self-Storage Facilities.......................... 10
Retail Sales........................................................... 13
Truck Rentals.......................................................... 13
Other Businesses....................................................... 14
Employees.............................................................. 14
Purchases of Services and Supplies..................................... 14
Legal Proceedings...................................................... 14
Arrangements Between Orangeco and Public Storage............................ 14
Distribution Agreement................................................. 14
Intercompany Operating Agreements...................................... 15
Other Agreements....................................................... 16
Agreement with PSCC, Inc............................................... 16
Management of Facilities............................................... 16
Selected Financial Information of Orangeco.................................. 17
Management's Discussion and Analysis of Financial Condition and Results of
Operation of Orangeco...................................................... 19
Management of Orangeco...................................................... 25
Directors of Orangeco.................................................. 25
Committees of the Orangeco Board....................................... 25
Compensation of Directors.............................................. 26
Executive Officers of Orangeco......................................... 26
Executive Compensation................................................. 27
Orangeco 2000 Stock Option and Incentive Plan.......................... 27
Annual Meeting......................................................... 30
Security Ownership of Orangeco Common Stock by Certain Beneficial Owners
and Management............................................................. 31
Security Ownership of Certain Beneficial Owners........................ 31
Security Ownership of Management....................................... 32
Description of Orangeco Capital Stock....................................... 33
General................................................................ 33
Orangeco Common Stock.................................................. 33
Preferred Stock........................................................ 33
Equity Stock........................................................... 33
Effects of Issuance of Capital Stock................................... 33
Federal Income Tax Considerations........................................... 34
Liability of Directors and Officers; Indemnification........................ 36
Historical and Pro Forma Financial Statements of Orangeco...................
i
<PAGE>
SUMMARY
Public Storage
- --------------
o Public Storage is the distributing company and at the time of the
distribution will own all of the capital stock of Orangeco.
o Public Storage is a fully integrated, self-administered and
self-managed real estate investment trust ("REIT") that acquires,
develops, owns and operates mini-warehouses, which are self-service
facilities offering storage space for personal and business use.
o Public Storage is the largest owner and operator of mini-warehouses in
the United States. At December 31, 1999, Public Storage had equity
interests (through direct ownership, as well as general and limited
partnership interests) in 1,330 mini-warehouses and storage facilities
in 37 states.
o Public Storage also owns a substantial economic interest in PS
Business Parks, Inc., and its operating partnership, which, as of
December 31, 1999, owned and operated 125 commercial properties in 11
states.
o The Public Storage common stock and 13 series of Public Storage
preferred stock are traded on the New York Stock Exchange.
o Public Storage has elected to be taxed as a REIT for federal income
tax purposes. To the extent that Public Storage continues to qualify
as a REIT, it will not be taxed, with certain limited exceptions, on
the net income that is distributed currently to its shareholders.
Orangeco
- --------
At the time of the distribution, Orangeco, either directly or through a
subsidiary, will be engaged in the following businesses:
o portable self-storage;
o sale of locks, boxes and packing materials in connection with its
business; and
o rental of trucks at Public Storage facilities.
Orangeco was organized in November 1994. As used in this information
statement, the term "Orangeco" includes Orangeco and its subsidiaries. Orangeco
may also engage in other activities. See "Business."
Address and Telephone Number
- ----------------------------
The principal executive offices of Public Storage and Orangeco are
located at 701 Western Avenue, Glendale, California 91201-2349. The telephone
number is (818) 244-8080.
1
<PAGE>
The Distribution
- ----------------
The following is a brief set of questions and answers about the
distribution.
Why is Public Storage distributing
shares of Orangeco at this time? The board of directors of Public
Storage is concerned that continued
growth in Orangeco's activities under
the current corporate structure could
jeopardize Public Storage's status as a
REIT. The distribution should permit
this continued growth without affecting
Public Storage's status as a REIT. A
distribution before additional growth
takes place also should reduce the tax
cost to the shareholders of the
distribution.
Do I have to pay for shares of
Orangeco in the distribution? No.
What do I have to do to participate
in the distribution? Nothing; no shareholder vote or other
action is required. You do not need to
surrender any shares of Public Storage
common stock to receive shares of
Orangeco common stock in the
distribution.
What will I receive in the distribution?
Public Storage will distribute one
share of Orangeco common stock for
every 20 shares of Public Storage
common stock owned as of the record
date. You will continue to own your
Public Storage common stock.
When is the distribution date? _______________, 2000
When is the record date? _______________, 2000
How will Public Storage distribute
Orangeco's common stock to me? If you are a shareholder of record of
Public Storage common stock on the
record date, BankBoston, N.A. will mail
you a certificate representing your
Orangeco common stock shortly after
_______________, 2000. Following the
distribution you may retain shares of
Orangeco common stock, sell them or
transfer them to a brokerage or other
account. You will not receive new
Public Storage stock certificates.
What if I hold my shares of Public
Storage stock through my stockbroker,
bank or other nominee? If you hold your shares of Public
Storage common stock through your
stockbroker, bank or other nominee, you
are probably not a shareholder of
record and your receipt of Orangeco
common stock depends on your
arrangements with the nominee that
holds your shares of Public Storage
common stock for you. We anticipate
that stockbrokers and banks generally
will credit their customers' accounts
with Orangeco common stock shortly
following the distribution date, but
you should check with your stockbroker,
bank or other nominee. Following the
distribution you may instruct your
stockbroker, bank or other nominee to
transfer your shares of Orangeco common
stock into your own name.
2
<PAGE>
What if I would be entitled to a
fractional share of Orangeco after
the distribution? You will receive cash instead of a
fractional interest in a share of
Orangeco common stock for any interest
of less than one whole share of
Orangeco to which you would be
entitled. The amount of cash will be
based on the estimate of the value of
the Orangeco common stock.
What is Orangeco's dividend policy? Orangeco currently anticipates that no
cash dividends will be paid on its
common stock in the foreseeable future.
Orangeco intends to use its available
cash to expand its operations.
How will Orangeco's common stock trade? We have applied to have Orangeco common
stock quoted on the NASDAQ National
Market under the symbol "__________"
and expect that regular quotation will
begin on _______________, 2000.
[Public Storage common stock will
continue to trade on a regular basis
reflecting the combined value of Public
Storage and Orangeco until
_______________, 2000. Public Storage
stock will trade carrying due-bills
representing Orangeco common stock from
_______________, 2000 through
_______________, 2000. These due-bills
will be redeemed for Orangeco common
stock on _______________, 2000.]
Is the distribution taxable for U.S.
tax purposes? Yes. The distribution will be taxable
to you in 2000 as if you had received a
cash distribution equal to the fair
market value of the distributed
Orangeco common stock.
What are the risks involved in owning
Orangeco common stock? The separation of Orangeco from Public
Storage presents certain risks. For
example, Orangeco has no prior history
of operating as an independent company.
Certain other risks are associated with
owning Orangeco common stock due to the
nature of its businesses, the markets
in which it competes and potential
conflicts of interest. You are
encouraged to consider these risks
carefully, which are described in
greater detail on pages 5 through 6.
Will Public Storage and Orangeco be
related in any way after the
distribution? Immediately following the distribution,
Public Storage will own 9.5% of the
shares of Orangeco, and Orangeco will
also continue to have significant
contractual relationships with Public
Storage, including significant
allocation and cost sharing agreements
and a long-term joint marketing
program. Orangeco also will lease from
Public Storage space to operate some of
Orangeco's facilities. These
relationships are described in greater
detail on pages 14 through 16.
3
<PAGE>
Information Regarding the Distribution and Orangeco
- ---------------------------------------------------
Before the distribution, you should direct inquiries relating to the
distribution to:
BankBoston, N.A. Public Storage, Inc.
[address] 701 Western Avenue
Glendale, California 91201-2349
telephone: 818\244-8080
<PAGE>
After the distribution, you should direct inquiries relating to an
investment in Orangeco common stock:
PS Orangeco, Inc.
701 Western Avenue
Glendale, California 91201-2349
telephone: 818\244-8080
After the distribution, the transfer agent and registrar for Orangeco's
common stock will be:
BankBoston, N.A.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
telephone: 781\575-3120
www.EquiServe.com
4
<PAGE>
RISK FACTORS
You should carefully consider and evaluate all of the information set
forth in this information statement, including the factors listed below.
An active trading market for the Orangeco common stock
may never develop or be sustained.
- ------------------------------------------------------
Before the distribution there has been no market for the Orangeco
common stock. Consequently, an active trading market for the Orangeco common
stock may never develop or be sustained.
The distribution will be taxable to you without
a corresponding payment of cash.
- -----------------------------------------------
Unless you are tax-exempt, the distribution will be taxable to you in
2000 as ordinary income as if you had received a taxable cash dividend equal to
the full fair market value of the Orangeco common stock received in the
distribution and the amount of any cash received in lieu of a fractional share.
You will not receive a corresponding payment of cash in respect of the
distribution. Public Storage's board of directors has estimated that the fair
market value of one share of Orangeco common stock on __________, 2000, if the
distribution had occurred on that date, would have been $______. There can be no
assurance that the Internal Revenue Service will agree with the valuation on the
date of the distribution.
The distribution also will be a taxable transaction for Public Storage,
which will recognize gain to the extent that the fair market value of the
distributed Orangeco common stock exceeds Public Storage's tax basis in the
distributed shares. The aggregate amount of gain is estimated to be $__________.
Public Storage also will claim a dividends-paid deduction for tax purposes in
2000 equal to the fair market value of the distributed Orangeco common stock (in
the same amount per share as taxable shareholders would report as taxable income
when they receive the distribution). That deduction will be taken into account
by Public Storage along with its other distributions in seeking to satisfy the
distribution requirements applicable to Public Storage as a REIT. See "Federal
Income Tax Considerations."
Orangeco has a limited history in operating portable self-storage.
- ------------------------------------------------------------------
Orangeco began operating portable self-storage in late 1996. There can
be no assurance as to the profitability of this business.
Orangeco is dependent on Public Storage.
- ----------------------------------------
After the distribution, Orangeco will continue to have significant
ownership and contractual relationships with Public Storage.
o Public Storage will own 9.5% of Orangeco common stock.
o The intercompany operating agreement between Public Storage and
Orangeco provides, among other things, significant allocation and cost
sharing arrangements and a long-term joint marketing program between
Orangeco and Public Storage. Except as provided in the intercompany
operating agreement, Public Storage has no obligation to provide
marketing services to Orangeco.
o Orangeco leases from Public Storage the portable self-storage portion
of the facilities that combine portable self-storage and
mini-warehouse space. The term of the leases is ten years with an
option by Orangeco to extend for an additional ten years.
See "Arrangements Between Orangeco and Public Storage - Intercompany
Agreements."
5
<PAGE>
Orangeco has significant future capital requirements.
- -----------------------------------------------------
Orangeco has significant working capital and cash flow requirements.
Since Orangeco's organization these requirements have been met by Public
Storage. After the distribution, Public Storage has no obligation to provide
financial support for Orangeco. Orangeco believes that it will be able to obtain
a bank line on satisfactory terms. However, at the time of the distribution,
Orangeco will not have any agreements or understandings with a financial
institution and there can be no assurance that satisfactory arrangements can be
made. See "Selected Financial Information of Orangeco" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation of
Orangeco."
Orangeco is subject to operating risks.
- ---------------------------------------
The ability of Orangeco to operate profitably is dependent in
significant part upon its success in the relatively new field of portable
self-storage. In the case of each new facility, Orangeco will be commencing a
portable self-storage operation which will be subject to the risks of any
starting enterprise.
Orangeco is subject to the risks generally incident to operating
businesses. These risks include:
o lack of demand for storage containers and storage related products and
services;
o increases in competition;
o changes in general economic or local conditions;
o increases in the cost of capital equipment;
o changes in interest rates; and
o changes in regulatory requirements.
There is significant competition in Orangeco's businesses.
- ----------------------------------------------------------
Competition in all of Orangeco's businesses is significant, with
competition in all or substantially all of the markets in which Orangeco
operates and with competition in portable self-storage expected to increase as
this business matures. Market entry is relatively easy for persons or
institutions that have the required initial capital. The successful operation of
portable self-storage facilities is likely to result in more intense
competition. Portable self-storage facilities also compete with mini-warehouses
and, to a lesser extent, with traditional moving and storage operations located
in the same market area. See "Business - Portable Self-Storage - Competition,"
"- Truck Rentals" and "- Retail Stores."
Orangeco may incur environmental costs and liabilities.
- -------------------------------------------------------
Under various federal, state and local environmental laws, an owner or
operator of real estate interests may have to clean up spills or other releases
of hazardous or toxic substances on or from a property. Certain environmental
laws impose liability whether or not the owner knew of, or was responsible for,
the presence of the hazardous or toxic substances. In some cases, liability may
not be limited to the value of the property. The presence of such substances, or
the failure to remediate any resulting contamination properly, also may
adversely affect the owner's or operator's ability to sell, lease or operate its
property or to borrow using its property as collateral.
There may be conflicts of interest following the distribution.
- --------------------------------------------------------------
B. Wayne Hughes will serve as chairman of the board and chief executive
officer of both Public Storage and Orangeco. Public Storage and Orangeco will at
least initially have other common officers and will be party to significant cost
sharing arrangements.
As a result there may be conflicts of interest following the distribution.
The Hughes family could control Orangeco.
- -----------------------------------------
After the distribution, Mr. Hughes and members of his family will own
31% of Orangeco common stock (and will also own the same percentage of Public
Storage common stock), and Public Storage will own 9.5% of Orangeco common
stock. Consequently, the ability of public shareholders to determine matters
submitted to a shareholder vote will be substantially impaired. See "Security
Ownership of Orangeco Common Stock by Certain Beneficial Owners and Management."
6
<PAGE>
Orangeco does not intend to pay dividends.
- ------------------------------------------
Orangeco intends to use its available funds to expand its operations
and it does not intend to pay any dividends in the foreseeable future. See
"Dividend Policy of Orangeco."
ABOUT THIS INFORMATION STATEMENT
This information statement is part of a registration statement that
Orangeco filed with the Securities and Exchange Commission for the Orangeco
common stock being issued in the distribution. This information statement
provides you with a general description of the Orangeco common stock. You should
read this information statement together with the additional information
described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Orangeco has filed with the Commission a registration statement on form
10 under the Securities Exchange Act of 1934. This information statement, which
constitutes part of the registration statement, does not contain all of the
information set forth in the registration statement. Certain parts of the
registration statement are omitted from this information statement as permitted
by the rules and regulations of the Commission. For further information, please
refer to the registration statement. Statements made in this information
statement concerning the contents of any documents referred to in this
information statement are not necessarily complete, and in each case are
qualified in all respects by reference to the copy of that document filed with
the Commission.
You may read and copy the registration statement, as well as the
exhibits and the schedules to the registration statement, at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. In addition, the Commission maintains an Internet
site that contains information regarding issuers that file electronically and
the address of that site is http://www.sec.gov.
Following the distribution described in this information statement,
Orangeco will be required to comply with the reporting requirements of the
Exchange Act and will file annual, quarterly and other reports with the
Commission. Orangeco will also be subject to the proxy solicitation requirements
of the Exchange Act and, accordingly, will furnish audited financial statements
to its shareholders in connection with its annual meetings of shareholders.
You should rely only on the information contained in this information
statement or in documents to which you have been referred. We have not
authorized anyone to provide you with information that is different.
CAUTIONARY STATEMENT
Statements contained in this information statement that are not based
on historical fact are "forward-looking statements." Forward-looking statements
may be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "continue" or similar terms, variations of those
terms or the negative of those terms. Cautionary statements set forth in "Risk
Factors" and elsewhere in this information statement identify important factors
that could cause actual results to differ materially from those in the
forward-looking statements.
7
<PAGE>
THE DISTRIBUTION
Background and Reasons for the Distribution
- -------------------------------------------
Public Storage is a REIT organized in 1980 that is principally engaged
in the business of owning and operating mini-warehouses. Public Storage has
owned substantially all of the economic interests in Orangeco, which was
organized in November 1994 and has engaged in certain businesses related to
Public Storage's mini-warehouse operations. These include primarily the portable
self-storage business, the sale of locks, boxes and packing materials and the
rental of trucks at Public Storage's mini-warehouses as well as other activities
(collectively, the "Other Activities"). The Other Activities generally produce
income that would be "non-qualifying" income if earned directly by Public
Storage under the tax laws applicable to REITs. The tax laws limit the amount of
non-qualifying gross income that may be generated by a REIT to 5% of the REIT's
gross income. That limitation does not apply to Orangeco, which unlike Public
Storage, is a "C" corporation that is subject to regular income tax.
The tax laws applicable to REITs also contain certain other
restrictions that might come into play (in the absence of the distribution) if
the growth in value of the Other Activities is consistent with or exceeds Public
Storage's expectations. The current REIT tax provisions prohibit a REIT from
owning at the end of any calendar quarter stock or securities (including loans
other than mortgages adequately secured by real property) of a C corporation
with a value of more than 5% of the REIT's total assets, and also preclude
ownership of more than 10% of the voting securities of a C corporation.
Beginning January 1, 2001, the tax laws applicable to REITs have been amended to
change the 10% voting securities limit. After that date, REITs generally will be
prohibited from owning more than 10% of the vote or value of a C corporation
(subject to certain grandfather rules), but will be permitted to own up to 100%
of certain "taxable REIT subsidiaries" ("TRSs"). The value of all TRSs must be
less than 20% of the total value of the REITs' assets. While the new rules will
ease the REIT restrictions to some extent, they continue to place significant
value limitations on a REIT's ownership interest in other taxable corporations.
The distribution would segregate the basic mini-warehouse business and
the Other Activities (other than the sale of locks, boxes and packing materials
at Public Storage facilities, which Public Storage will undertake through a
subsidiary) into separately owned corporate entities that initially have the
same common stock ownership. The distribution is designed to permit continued
growth of the Other Activities without the restraints imposed by the REIT tax
restrictions. After the distribution, the value of Orangeco (engaged in most of
the Other Activities) may increase without limitation, without affecting Public
Storage's continued status as a REIT. By making the distribution at this time,
the shareholders will be taxable upon the current fair market value of the
distributed Orangeco common stock. If the distribution were to be made at a
different time following a significant increase in the value of the distributed
assets, taxable shareholders would be faced with increased taxes on any such
appreciation in value. This factor also appears to make a current distribution
of the Other Activities advantageous.
Manner of Effecting the Distribution
- ------------------------------------
Prior to and for the purpose of facilitating the distribution, Orangeco
was reorganized and recapitalized.
In addition, to accomplish the distribution, on or about __________,
2000, the following actions will be taken:
o Public Storage distributes shares of Orangeco common stock to holders
of Public Storage common stock on the basis of one share of Orangeco
common stock for each 20 shares of Public Storage common stock held on
_______________, 2000, the record date. See "Description of Orangeco
Capital Stock - Common Stock."
o Public Storage will pay cash instead of a fractional interest in
a share of Orangeco common stock for any interest of less than
one whole share of Orangeco to which any holder would be entitled.
The amount of cash will be based on the estimate of the value of the
Orangeco common stock.
o Public Storage distributes shares of Orangeco common stock to the
Hughes family as holders of Public Storage's class B common stock on
the basis of .97 shares of Orangeco common stock for each 20 shares of
Public Storage's class B common stock held on the record date.
8
<PAGE>
o You will not have to pay for the shares of Orangeco common stock in
the distribution.
o You will not have to surrender or exchange shares of Public Storage
common stock or to take any other action in order to receive the
Orangeco common stock.
Conditions; Termination
- -----------------------
The distribution is conditioned upon:
o The registration statement having become effective; and
o The Orangeco common stock having been approved for quotation on the
NASDAQ National Market System.
Even if all the conditions of the distribution are satisfied, Public Storage's
board of directors has reserved the right to abandon, defer or modify the
distribution at any time prior to __________, 2000.
Valuation; Financial Advisor
- ----------------------------
Public Storage's board of directors has engaged a financial advisor,
which has estimated that the fair market value of one share of Orangeco common
stock on _______________, 2000, if the distribution had occurred on that date,
would have been $__________.
Following the distribution, the financial advisor will update its
estimate of the fair market value of the Orangeco common stock as of the date of
the distribution. This information will be mailed to Public Storage's
shareholders for use in reporting the distribution for income tax purposes.
Public Storage will report the distribution to the Internal Revenue Service (the
"Service") as the payment of a property dividend to its shareholders in an
amount equal to the fair market value of the Orangeco common stock at the date
of the distribution, as estimated by the financial advisor. There can be no
assurance that the Service will agree with this estimate of the valuation of the
Orangeco common stock.
CAPITALIZATION
The table below sets forth, as of December 31, 1999, the historical
combined capitalization of Orangeco and the pro forma combined capitalization of
Orangeco after the distribution. This table should be read in conjunction with
the historical and pro forma combined financial statements and the notes thereto
contained in this information statement:
<TABLE>
<CAPTION>
At December 31, 1999
-------------------------------------
Orangeco Orangeco
Historical Pro Forma (1)
--------------- -----------------
<S> <C> <C>
Advances from Public Storage......................... $ 103,799,000 $ -
Common stock, $0.10 par value, 200,000,000 shares
authorized, 7,374,972 pro forma shares issued and
outstanding at December 31, 1999................... - 737,000
Paid-in capital................................... - 106,451,000
Deficit........................................... (26,611,000) -
--------------- -----------------
Total Shareholders' equity (deficit)................. $ (26,611,000) $ 107,188,000
--------------- -----------------
Total capitalization................................. $ 77,188,000 $ 107,188,000
=============== =================
</TABLE>
- ---------------
(1) Reflects cash contribution of $30,000,000 by Public Storage in
connection with the distribution and the conversion of advances from Public
Storage to equity in Orangeco.
9
<PAGE>
DIVIDEND POLICY OF ORANGECO
Orangeco intends to use its available funds to expand its operations
and does not intend to pay any dividends in the foreseeable future. Payment of
dividends on the Orangeco common stock will likely be restricted by credit
facilities that Orangeco may obtain from time to time. The declaration of
dividends is subject to the discretion of Orangeco's board of directors.
BUSINESS OF ORANGECO
Operation of Portable Self-Storage Facilities
- ---------------------------------------------
General. Orangeco has been engaged in the portable self-storage
business since 1996. Orangeco operates this business from facilities it owns,
facilities it leases from third parties and facilities it leases from, or
manages for, Public Storage and its affiliates. Storage containers are delivered
to customers' home for packing and locking by the customers. Containers are
picked up at the customers' home and delivered to an Orangeco portable
self-storage facility where they are stored. Customers may access their
containers at the facilities during designated operating hours. At the end of
the storage period, the containers may be redelivered to customers' homes. In
addition to the monthly rental charge, service fees may be charged for pickup
and delivery of containers. Alternatively, to avoid transportation charges,
customers may pack and/or unpack their containers at the facilities.
The storage containers are wood and generally measure 8' tall x 5' deep
x 7' wide. The facilities are typically concrete buildings equipped with burglar
alarm and fire and smoke detection systems and generally have a capacity for
1,000 to 3,000 storage containers.
At December 31, 1999, Orangeco operated a total of 36 facilities in 20
greater metropolitan areas in 11 states. As with mini-warehouses, Orangeco
believes that the portable self-storage business experiences some seasonal
fluctuations in occupancy levels, with occupancies generally higher in the
summer months than the winter months. There can be no assurance as to the level
of Orangeco's expansion, rate of fill-up or profitability.
Strategy. Orangeco and Public Storage believe Orangeco's business
complements Public Storage's mini-warehouse operations. Accordingly, Public
Storage is developing facilities that combine mini-warehouse and portable
self-storage operations and leasing a portion of the facility to Orangeco to
operate portable self-storage. Orangeco expects that an increasing part of its
business will be operated from this type of combination facility. Portable
self-storage is designed to provide an alternative to mini-warehouse customers,
particularly for those who desire or require the convenience offered by
Orangeco's business. Orangeco and Public Storage jointly use a national
telephone reservation system, which supports rental activity in all of the
markets in which Orangeco's facilities are located. Customers calling either the
toll-free telephone referral system of Orangeco and Public Storage or a
mini-warehouse facility are routed to a reservation system where a
representative discusses with the customer space requirements, price and
location preferences. Orangeco and Public Storage use other joint marketing
programs, including radio and television advertising, as well as the
PublicStorage.com internet website, to promote their rental activity.
Competition. Current competition in the portable self-storage business
is largely from local operators in certain markets. One of Public Storage's
national mini-warehouse competitors, as well as various other companies, are
operating portable self-storage facilities in more than one market. Portable
self-storage facilities also compete with mini-warehouses located in the same
market and, to a lesser extent, with traditional warehouses and moving
companies. Competition from one of these sources exists in all of the markets in
which Orangeco operates. Market entry is relatively easy for persons or
institutions that have the required initial capital. The successful operation of
existing and new portable self-storage facilities would generate more intense
competition. Orangeco believes that its agreements with Public Storage,
including use of the national telephone reservation system, should enable
Orangeco to compete effectively.
10
<PAGE>
Properties. The following table sets forth information as of December
31, 1999 about facilities owned and operated by Orangeco:
Number of Portable Date Opened
Location Containers(1) (Actual or Projected)
-------- ------------- ---------------------
Florida
Pompano Beach 2,700 June, 1998
Miami 2,500 December, 1998
Washington
Renton 3,036 June, 1998
Colorado
Denver 1,743 December, 2000
California
Burlingame 2,223 January, 1998
---------------
(1) Maximum capacity.
11
<PAGE>
The following table sets forth information as of December 31, 1999
about facilities leased by Orangeco:
<TABLE>
<CAPTION>
Number of
Portable Lease
Location Containers(1) Expiration Date Annual Rent Date Opened
- -------- ------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Arizona
Phoenix 2,000 May, 2002 $ 266,000 April, 1997
California
Chula Vista 1,827 May, 2002 220,000 April, 1997
City Of Industry 2,079 October, 2000 238,753 November, 1996
Cypress 2,074 September, 2001 310,000 December, 1996
Gardena 2,577 March, 2007 450,000 December, 1996
Irvine 2,050 March, 2003 235,000 August, 1996(3)
Los Angeles 1,750 April, 2005 431,000 April, 1997
Oakland 2,886 July, 2001(2) 432,000 October, 1997
Sacramento 2,704 March, 2002 267,000 January, 1997
San Diego 1,663 September, 2002(2) 266,000 September, 1997
San Jose 2,150 February, 2001 465,000 December, 1997
Whittier 2,487 April, 2003(2) 293,000 January, 1998
Colorado
Aurora 2,055 July, 2002 232,000 June, 1997
Golden 2,256 December, 2002 316,000 June, 1997
Florida
Orlando 1,788 October, 2002 230,000 April, 1997
Tampa 1,827 June, 2002 223,000 May, 1997
Georgia
Duluth 2,394 March, 2002 215,000 April, 1997
Forest Park(4) 2,800 December, 2009(2) 265,000 June, 1999
Illinois
Alsip 2,709 April, 2003 450,000 May, 1998
Elk Grove Village 1,504 May, 2002 193,000 July, 1997
Morton Grove 1,833 June, 2002 222,000 July, 1997
Maryland
Baltimore 2,400 August, 2002 251,000 June, 1997
Columbia 2,445 June, 2002 313,000 May, 1997
Landover 1,916 May, 2006(2) 297,000 November, 1997
Missouri
Bridgeton 1,998 October, 2002 220,000 September, 1997
New York
Bethpage 2,124 January, 2003 422,000 October, 1997
Texas
Austin 1,929 January, 2002 307,000 January, 1997
Fort Worth 4,600 August, 2002(2) 269,000 March, 1997
Houston 3,365 September, 2002 227,000 April, 1997
Plano 1,869 July, 2000 240,284 June, 1997
San Antonio 2,210 October, 2002 275,683 February, 1997
</TABLE>
- ---------------
(Footnotes on following page.)
12
<PAGE>
(1) Maximum capacity. Some of these facilities are expected to be replaced by
facilities under construction by Public Storage. The maximum capacity of
the replacement facilities may differ. See "Arrangements Between Orangeco
and Public Storage Intercompany Operating Agreement - Lease of Facilities
and Completion of Facilities for Lease."
(2) Subject to an option to extend.
(3) Lease assumed in connection with acquisition of existing portable
self-storage business in 1996.
(4) Leased from Public Storage. Consists of a facility that combines
mini-warehouse and portable self-storage operations. Replaced facility
that had been leased from third party since June 1997.
The following table sets forth information about facilities managed by
Orangeco for Public Storage or an affiliate:
<TABLE>
<CAPTION>
Number of Number of
Portable Mini-Warehouse
Location Containers(1) Spaces(1) Date Opened
-------- ------------- -------------- -----------
<S> <C> <C> <C>
Northridge, California 2,150 795 November, 1998
Los Angeles, California 1,161 697 April, 2000
</TABLE>
---------------
(1) Maximum capacity.
The management agreements provide that Orangeco (1) guarantees that the
owner will continue to receive the net operating income earned by the facilities
prior to Orangeco's management of the facilities (escalated by the annual
increases in net operating income for mini-warehouses operated by Public Storage
in the same markets (minimum rent escalations of 1% per year)) and (2) receives
any additional net operating income earned by the facilities.
Orangeco owns two recently constructed industrial properties that are
currently leased to third parties.
Retail Sales
- ------------
In connection with its business, Orangeco offers for sale a variety of
items to assist in the moving and storage of goods. These items include locks,
moving and storage boxes, tape, rope, marking pens and storage racks. Public
Storage through a subsidiary will offer for sale similar products at its
mini-warehouses.
Competition among packing and shipping stores is intense and includes
national, regional and local operators. Similar products are offered at
mini-warehouses owned by other national, as well as local, operators and by
moving companies. Orangeco believes its ability to compete effectively is
facilitated by offering the products in conjunction with the rental of storage
space.
Truck Rentals
- -------------
At many Public Storage mini-warehouses, Orangeco offers truck rentals
to the general public, including mini-warehouse tenants. Zoning and other
regulatory restrictions, as well as property location and insufficient space,
effectively preclude truck rentals at many Public Storage mini-warehouses.
Orangeco has contracted with Penske Truck Leasing Co. to supply trucks
and to assist in the operations of the truck rental program. Penske both leases
trucks to Orangeco and makes available additional trucks as to which Orangeco
earns rental commissions. Orangeco, Penske and Public Storage cooperate in
cross-marketing, incentive and promotional arrangements and in joint advertising
efforts, including "yellow pages" advertisements in telephone directories,
newspaper and other print advertisements. Orangeco and Public Storage jointly
use a national telephone reservation system, which supports truck rental
activity in all markets in which truck rentals are offered.
Competition among truck rental operators is intense with several
national companies and many local operators offering truck rentals. Truck
rentals are offered at many mini-warehouses that compete with Public Storage.
Orangeco believes that its cross-marketing arrangements with Public Storage
should enable Orangeco to compete effectively.
13
<PAGE>
Other Businesses
- ----------------
Orangeco has recently initiated a program offering moving services in a
few markets. There can be no assurance that Orangeco will continue or expand
these activities or that they will be successful.
Orangeco has organized a subsidiary which intends to create an internet
web site for Public Storage and itself to market moving and related services.
Orangeco may also engage in other web businesses with Public Storage or others.
There can be no assurance as to the success of any such ventures. See
"Arrangements Between Orangeco and Public Storage - Intercompany Operating
Agreements - Joint Marketing Activities and Orangeco Web Site."
Employees
- ---------
At February 29, 2000, Orangeco had approximately 320 full-time
employees, substantially all of whom are engaged in portable self-storage.
Certain Public Storage employees, including executive personnel, perform
services on behalf of Orangeco, which pays a portion of their compensation.
Purchases of Services and Supplies
- ----------------------------------
PSCC, Inc. was organized to perform centralized administrative services
for Public Storage and other property owners affiliated with Public Storage.
These services include accounting and finance, employee relations, management
information systems, legal, office services, marketing, administration and
property management training. In addition, to take advantage of economies of
scale, PSCC purchases supplies and services, including yellow pages and media
advertising and property liability and casualty insurance, for the benefit of
multiple property owners and allocates the costs of these supplies and services
to the benefited property owners. Orangeco is also a party to the agreement with
PSCC. Orangeco, Public Storage and other owners of facilities for which PSCC
performs services own the capital stock of PSCC.
Legal Proceedings
- -----------------
In the ordinary course of business, Orangeco is subject to various
pending claims, lawsuits and contingent liabilities. Orangeco does not believe
that disposition of these matters will have a material adverse effect on
Orangeco's consolidated financial position or results of operations.
ARRANGEMENTS BETWEEN ORANGECO AND PUBLIC STORAGE
After the distribution, Public Storage will own 9.5% of Orangeco common
stock. Orangeco and Public Storage are also parties to various agreements
described below. These agreements are conditioned upon completion of the
distribution.
Distribution Agreement
- ----------------------
The distribution agreement between Orangeco and Public Storage dated as
of _______________, 2000, provides for the following:
o Public Storage has agreed to contribute $30 million to Orangeco prior
to the distribution.
o Advances from Public Storage will be converted into equity of Orangeco.
o Orangeco and Public Storage have agreed to the corporate transactions
required to effect the distribution. See "The Distribution - Manner of
Effecting the Distribution" and "- Conditions; Termination."
o Orangeco and Public Storage have agreed to cross-indemnities designed
primarily to place financial responsibility for the liabilities of
Public Storage with Public Storage and financial responsibility for
the liabilities of Orangeco with Orangeco.
14
<PAGE>
Intercompany Operating Agreements
- ---------------------------------
Various intercompany agreements between Orangeco and Public Storage
dated as of _______________, 2000, with terms of generally 20 years, provide for
the following:
Lease of Facilities and Completion of Facilities for Lease
----------------------------------------------------------
o Public Storage agrees to net lease to Orangeco, for use in Orangeco's
portable self-storage business, the portable self-storage portion of
existing facilities owned by Public Storage that combine portable
self-storage and mini-warehouse space on the following terms
o term of ten years with an option by Orangeco to extend an
additional ten years;
o annual rental rate of 14% of the cost of construction of the
portion of the facility being leased;
o rental rate adjusted every five years based on the average of the
increase in the consumer price index for the five year period
preceding the adjustment; and
o monthly rental payments.
o Public Storage agrees, at its cost, to (1) complete the construction
of 34 facilities currently under development (aggregate acquisition
and development costs of approximately $60 million at December 31,
1999 and estimated aggregate remaining construction costs of
approximately $99 million at December 31, 1999) and (2) acquire the
land currently under contract for, and complete the development of,
eight facilities (estimated aggregate acquisition and construction
costs of approximately $60 million at December 31, 1999). These
contracts are subject to significant contingencies, and, if a property
is not acquired, Public Storage has no obligation to acquire and
construct a replacement property. These facilities would combine
portable self-storage and mini-warehouse space.
o Upon completion of construction Public Storage agrees to lease to
Orangeco, for use in its portable self-storage business, a portion of
the facilities under construction or proposed construction on the same
terms as the leases for the existing facilities.
o Upon completion of a facility that replaces an existing facility,
Public Storage agrees to assume Orangeco's lease for the replaced
facility.
Retail Sales
------------
o Orangeco and Public Storage agree to jointly purchase locks, boxes and
other moving and storage supplies for sale in connection with their
respective businesses.
o Orangeco agrees that, if practical, the "Public Storage" name and logo
will be placed on moving and packing materials sold by Orangeco.
Public Storage agrees that, if practical, Orangeco may designate a
name and logo to be placed on moving and packing materials sold by
Public Storage.
Truck Rentals
-------------
o Orangeco agrees to pay Public Storage a commission of 8% of revenues
from one-way and local rentals of trucks at Public Storage's
facilities.
o Orangeco agrees that the "Public Storage" name and logo will be placed
on all local rental trucks operated by Orangeco.
15
<PAGE>
Joint Marketing Activities and Orangeco Web Site
------------------------------------------------
o Orangeco and Public Storage agree to (1) cooperate in cross-marketing,
incentive and promotional arrangements and in joint advertising
efforts, including "yellow pages" advertisements in telephone
directories, newspaper and other print advertisements and radio and
television advertisements and (2) jointly use Public Storage's
national telephone reservation system. The costs of these activities
will be paid by Public Storage and Orangeco in accordance with
specified formulas. After three years, either party may terminate this
agreement with or without cause upon six months' notice.
o Public Storage agrees to use Orangeco's web site as the exclusive
internet "moving portal" to offer mini-warehouse spaces for rent and
boxes and packing materials for sale and to allow Orangeco to develop
other web businesses that would be operated jointly by Public Storage
and Orangeco in accordance with specified formulas. Public Storage is
not, however, restricted from offering mini-warehouse spaces for rent
and boxes and packing materials for sale through an internet "storage
portal" and through its PublicStorage.com internet web site.
o Public Storage agrees to pay Orangeco fees of (1) 10% of revenues
realized by Public Storage through the rental of mini-warehouse spaces
from orders placed through the Orangeco web site and (2) 20% of
revenues from the sale of boxes and packing materials from orders
placed through this site.
o Orangeco agrees (1) to promote actively Public Storage's
mini-warehouse spaces on Orangeco's web site and (2) not to advertise
mini-warehouse spaces of any other mini-warehouse that operates within
five miles of a Public Storage facility.
o Public Storage agrees, if practical, to include references to
Orangeco's internet moving portal on (1) signage at Public Storage's
facilities (at Orangeco's cost, except in the case of newly-developed
facilities, and subject to local governmental approvals) and (2) the
PublicStorage.com internet web site.
Other Agreements
- ----------------
o Orangeco agrees that, if it organizes any subsidiary within 30 months
of the distribution, Orangeco will grant options to acquire stock in
that subsidiary to those employees of Public Storage as may be
designated by Public Storage. The shares subject to these options may
not exceed 10% of the shares issued by a subsidiary. It is expected
that these options would be granted to employees who contributed to
the business of these subsidiaries.
Agreement with PSCC, Inc.
- -------------------------
For a discussion of Orangeco's agreement with PSCC, see "Business -
Purchases of Services and Supplies." After three years, either party may
terminate this agreement with or without cause upon six months' notice.
Management of Facilities
- ------------------------
For a discussion of the general terms that Orangeco manages two
portable self-storage facilities owned by Public Storage or an affiliate, see
"Business of Orangeco - Operation of Portable Self-Storage Facilities -
Properties."
16
<PAGE>
SELECTED FINANCIAL INFORMATION OF ORANGECO
The following table summarizes certain selected financial data of
Orangeco. The Statement of Operations data set forth below for each of the three
years ended December 31, 1999 and the Balance Sheet data as of the end of each
year in the two-year period ended December 31, 1999 are derived from the audited
combined financial statements of Orangeco included in this document. The
Statement of Operations data set forth below for the years ended December 31,
1996 and 1995 and the Balance Sheet data at December 31, 1997, 1996 and 1995 are
derived from unaudited combined financial statements of Orangeco. The historical
selected financial data may not necessarily be indicative of Orangeco's past or
future performance as an independent entity. Such historical data should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and Orangeco's Consolidated Financial
Statements and notes thereto included elsewhere in this document. The Pro Forma
data should be read in conjunction with the Pro Forma Combined Financial
Statements.
In reviewing this financial data, you should consider the following
unusual events and factors:
o The historical financial information reflect the historical operations
of portable self-storage, the rental of trucks, and the sale of
merchandise at the portable self-storage locations. The largest
component of Orangeco's operating results is the containerized
portable self-storage business.
o Orangeco commenced portable self-storage operations in August 1996
through the acquisition of a single facility operator. In 1997,
Orangeco expanded the business by opening additional facilities in
markets throughout the United States, increasing the number of open
facilities from 4 at December 31, 1996 to 49 at December 31, 1997. In
1998, Orangeco closed several facilities in non-strategic markets and
consolidated operations of several other facilities into existing
facilities, while opening several more facilities, decreasing the
number of opened facilities to 43 at December 31, 1998. In 1999,
Orangeco closed several more facilities, decreasing the number of open
facilities to 36 at December 31, 1999. The historical and pro forma
financial data includes the historical operating results of those
facilities that were closed.
o As a result of the startup nature of the portable self-storage
business, Orangeco sustained operating losses in 1997, 1998, and 1999.
o Orangeco believes that the quarterly losses from the portable
self-storage business peaked in the third quarter of 1997 at
approximately $12 million, and losses have decreased each quarter
thereafter through the fourth quarter of 1999, when quarterly losses
were approximately $1.3 million. Earnings before depreciation and
amortization for the last three and six months of 1999 were
approximately breakeven.
o At December 31, 1999, there were 36 facilities in operation. In order
to evaluate the ongoing portable self-storage business, management has
reviewed the operations of the 36 facilities that were open at
December 31, 1999, substantially all of which were in operation prior
to December 31, 1998. The results of operations and key selected
financial data of these facilities is included in the table which
follows.
o In connection with (and conditional upon) the distribution, Public
Storage and Orangeco have entered into significant intercompany
operating agreements described on page 14 that will have a substantial
impact upon the future operations of Orangeco. In addition, prior to
the distribution Public Storage will contribute $30 million in cash to
Orangeco and convert advances receivable into equity of Orangego. The
impact of certain of these arrangements is included in the "Pro Forma"
equity, cash and net income on the Pro Forma Financial Statements
included elsewhere herein. See also "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for
additional information with respect to the impact of these
arrangements.
17
<PAGE>
<TABLE>
<CAPTION>
(1) For the year ended December 31,
-------------------------------------------------------------------------------------
Pro Forma Historical Operations
----------- ----------------------------------------------------------------------
1999 (2) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Income statement information:
Revenues:
Operating revenues...................... $ 29,171 $ 29,171 $ 26,391 $ 9,135 $ 964 $ 113
Interest and other income (3)........... 239 239 141 75 16 -
----------- ----------- ----------- ----------- ----------- ----------
29,410 29,410 26,532 9,210 980 113
----------- ----------- ----------- ----------- ----------- ----------
Expenses:
Cost of operations...................... 28,654 32,054 49,813 32,367 1,552 160
Depreciation and amortization........... 6,193 6,193 4,645 1,715 32 -
General and administrative (4).......... 3,137 2,512 3,039 7,078 174 -
Interest expense........................ - 5,041 4,970 1,758 - -
----------- ----------- ----------- ----------- ----------- ----------
37,984 45,800 62,467 42,918 1,758 160
----------- ----------- ----------- ----------- ----------- ----------
Loss before loss on disposition of
equipment................................ (8,574) (16,390) (35,935) (33,708) (778) (47)
Loss on disposition of equipment.......... - - (640) - - -
----------- ----------- ----------- ----------- ----------- ----------
Net loss.................................. $ (8,574) $ (16,390) $ (36,575) $ (33,708) $ (778) $ (47)
=========== =========== =========== =========== =========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
Balance sheet information:
Total assets.............................. $ 110,677 $ 80,677 $ 64,853 $ 40,625 $ 12,197 $ -
Total liabilities......................... $ 3,489 $ 107,288 $ 120,964 $ 69,753 $ 12,325 $ -
Total equity (deficit).................... $ 107,188 $ (26,611) $ (56,111) $ (29,128) $ (128) $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Supplementary pro forma information with respect to the 36 Quarter Year
facilities open at December 31, 1999 (Dollar amounts in ended ended
thousands, except per-container amounts) (5) 12/31/1999 12/31/1999
----------- -----------
Revenues.............................................................. $ 7,438 $ 25,135
Cost of Operations.................................................... (6,387) (23,315)
Depreciation and amortization expense................................. (1,278) (4,715)
----------- -----------
Net operating loss.................................................... $ (227) $ (2,895)
=========== ===========
Weighted average number of occupied containers........................ 57,379 52,415
Weighted average monthly rent per occupied container.................. $38.43 $36.85
</TABLE>
- ---------------
(1) Operations in 1995 are composed exclusively of truck rental operations.
(2) Pro forma information reflects the impact of transactions occurring in
connection with the distribution, including a leasing arrangement with
Public Storage, additional general and administrative expense associated
with Orangeco's operation as a separate publicly traded legal entity,
Public Storage's contribution of $30 million, and the conversion of
advances owed to Public Storage into equity of Orangeco. See Pro Forma
Combined Financial Statements for more information.
(3) Interest and other income primarily includes interest income on cash
balances and the net results of merchandise sales at Orangeco's portable
self-storage locations.
(4) Orangeco incurred substantial general and administrative expenses in 1997
and 1998 related to recruiting and training personnel, equipment, computer
software, and professional fees in organizing the portable self-storage
business. General and administrative expense for 1999 and 1998 include
$0.9 million and $0.4 million, respectively, associated with terminated
leases on closed facilities.
(5) Amounts reflect operations with respect to the 36 facilities that were
open at December 31, 1999, including the impact of a leasing arrangement
with Public Storage occurring in connection with the distribution, whereby
Public Storage developed facilities will replace 27 of these facilities
that are currently leased from third parties. Upon Public Storage's
completion of the facilities, overall container capacity for these 36
facilities will be 66,400. Management reviews the operating results with
respect to these facilities in order to evaluate the ongoing results of
the portable self-storage business.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF ORANGECO
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." Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors, which may cause the actual results and performance of Orangeco 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
facilities which could impact rents and occupancy levels at Orangeco's
facilities; Orangeco's ability to evaluate, finance, and integrate facilities
into Orangeco's existing operations; Orangeco's ability to compete effectively
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, the acceptance by consumers of the Pickup and
Delivery concept; the impact of general economic conditions upon rental rates
and occupancy levels at Orangeco's facilities; and the availability of permanent
capital at attractive rates.
Overview: The following discussion should be read in conjunction with
the Combined Financial Statements of Orangeco and notes thereto elsewhere in
this Information Statement. Pursuant to a plan of distribution, Public Storage
expects to distribute 90.5% of the shares of Orangeco to shareholders of Public
Storage's common stock. At the time of the distribution, Orangeco will be
engaged in the following principal business activities: (i) containerized
portable self-storage activities (the "Portable Self-Storage Operations") and
(ii) the leasing of trucks at Public Storage facilities (the "Truck
Operations"). Orangeco will also sell merchandise at its portable self-storage
locations; such amounts are reflected as a component of interest and other
income. The Combined Financial Statements of Orangeco include the Portable
Self-Storage Operations, Truck Operations, as well as the sale of merchandise at
Orangeco's portable self-storage locations.
Portable Self-Storage Operations
- --------------------------------------------------------------------------------
The Portable Self-Storage Operations are by far the largest component
of Orangeco's current business activities. Storage containers are delivered to
customers' homes for packing and locking by the customers. Containers are picked
up at the customers' homes and delivered to facilities where they are stored.
Customers may access their containers at the facilities during designated
operating hours. At the end of the storage period, the containers are
redelivered to customers' homes. In addition to the monthly rental charge,
service fees may be charged for pickup and delivery.
In August 1996, Orangeco made its initial entry into the containerized
portable self-storage business through its acquisition of a single facility
operator located in Irvine, California. Since that time, Orangeco expanded the
business by opening additional facilities in markets throughout the United
States. At December 31, 1999, Orangeco operated 36 facilities in 11 states. The
facilities are located in major markets in which Public Storage has significant
market presence with respect to its traditional self-storage facilities.
The following table summarizes the operations of the Portable
Self-Storage Operations for 1999, 1998 and 1997:
19
<PAGE>
<TABLE>
<CAPTION>
Portable self-storage operations:
- ---------------------------------
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1999 1998 Change 1998 1997 Change
----------- --------- -------- ---------- --------- ---------
(Dollar amounts in thousand)
<S> <C> <C> <C> <C> <C> <C>
Rental and other income ............ $ 25,591 $ 24,238 $ 1,353 $ 24,238 $ 7,893 $ 16,345
Cost of operations:
Direct operating costs.......... 17,715 24,204 (6,489) 24,204 14,445 9,759
Marketing and advertising....... 1,333 9,206 (7,873) 9,206 10,441 (1,235)
Facility lease expense.......... 9,779 14,400 (4,621) 14,400 6,200 8,200
--------- --------- -------- --------- --------- ---------
Total cost of operations 28,827 47,810 (18,983) 47,810 31,086 16,724
--------- --------- -------- --------- --------- ---------
(3,236) (23,572) 20,336 (23,572) (23,193) (379)
Depreciation and amortization....... 6,162 4,614 1,548 4,614 1,692 2,922
General and administrative.......... 2,512 3,039 (527) 3,039 7,078 (4,039)
--------- --------- -------- --------- --------- ---------
Operating losses.................... $(11,910) $(31,225) $19,315 $(31,225) $(31,963) $ 738
========= ========= ======== ========= ========= =========
Number of facilities operating:
At beginning of year............. 43 49 (6) 49 4 45
At end of year................... 36 43 (7) 43 49 (6)
Number of occupied containers at the
end of the year................. 57,381 48,963 8,418 48,963 35,897 13,066
</TABLE>
Due to the start-up nature of the business, the Portable Self-Storage
Operations incurred operating losses totaling approximately $11.9 million, $31.2
million and $32.0 million for the years ended December 31, 1999, 1998, and 1997,
respectively, as summarized in the above table.
Orangeco believes that the quarterly losses from the Portable
Self-Storage Operations peaked during the third quarter of 1997. Operating
losses were approximately $12 million for the third quarter of 1997 and have
subsequently decreased each sequential quarter through the fourth quarter of
1999 where operating losses were approximately $1.3 million. Operations before
depreciation and amortization for the last six months of 1999 were approximately
breakeven.
The number of facilities operated by Orangeco increased from 4 at
December 31, 1996 to 49 at December 31, 1997 due to the opening of 45 facilities
in 1997. The number of facilities decreased to 43 at December 31, 1998, due to
the opening of 13 facilities and the closure of several facilities in
non-strategic markets and the consolidation of the operations of several other
facilities into existing facilities within the same markets. The number of
facilities decreased further to 36 at December 31, 1999 due to the closure and
consolidation of several additional facilities.
Rental and other income includes monthly rental charges to customers
for storage of the containers and service fees charged for pickup and delivery
of containers to customers' homes. The increase in rental and other income from
$7.9 million in 1997 to $24.2 million in 1998 is the result of the significant
expansion of the business throughout that period of time. Rental income
increased to $25.6 million in 1999 compared to $24.2 in 1998 principally as a
result of the increase in the number of occupied containers.
A typical facility generally has eight employees (a manager, customer
service agents, warehousemen, and truck drivers), trucks, trailers and
forklifts. Direct operating costs principally include payroll and equipment
(truck, trailer and forklift) maintenance expense. Direct operating costs
increased from $14.4 million in 1997 to $24.2 million in 1998, due primarily to
the opening of 45 facilities in 1997 and 13 facilities in 1998, offset partially
by the closure of several facilities in 1998. Direct operating costs decreased
to $17.7 million in 1999 compared to $24.2 million in 1998, due primarily to the
closure of several facilities in 1998.
20
<PAGE>
Orangeco believes that marketing and advertising activities positively
impact move-in activity. Commencing in the third quarter of 1997, Orangeco began
to advertise the portable self-storage product on television in selected
markets. Television advertising was curtailed in the second half of 1998.
Customers are directed to call Public Storage's national reservation system
where representatives discuss the customers' storage needs and are able to
schedule delivery of containers to customers' locations. Approximately $6.6
million and $9.2 million was incurred in television advertising during 1998 and
1997, respectively. There was no television advertising in 1999. Approximately
$0.6 million, $2.6 million and $1.2 million was incurred in yellow page
advertising during 1999, 1998 and 1997, respectively. The decrease in yellow
page advertising costs in 1999 as compared to 1998 is due to a decrease in the
number of facilities combined with increased efficiencies resulting from joint
yellow page advertising with Public Storage. Marketing and advertising
activities have not been consistently implemented in all markets.
Substantially all of the facilities are leased from third parties.
Facility lease expense increased from $6.2 million in 1997 to $14.4 million in
1998 as a result of the expansion of the business in additional leased facility
locations. Facility lease expense decreased to $9.8 million in 1999. The
decrease in facility lease expense in 1999 compared to 1998 was due to the
closure and consolidation of several facilities.
Orangeco and Public Storage believe that the portable self-storage
business complements Public Storage's mini-warehouse operations. Accordingly,
Public Storage is developing facilities that combine mini-warehouse and portable
self-storage operations. Public Storage will lease a portion of the facility to
Orangeco to operate its portable self-storage business. Orangeco expects that an
increasing part of its business will be operated from this type of combination
facility.
Public Storage is currently developing 34 combination facilities and
has identified eight additional sites for development of combination facilities.
Substantially all of these development projects are located in Orangeco's
existing markets with expected opening dates commencing during 2000 and will
predominantly replace existing Orangeco facilities which are currently being
leased from third parties. Orangeco has not determined the number of new
facility openings in 2000; however, Orangeco expects that future openings will
predominantly be in existing markets in which Orangeco currently operates. By
opening in existing markets, Orangeco will seek to gain benefits from economies
of scale. For the 27 facilities developed by Public Storage that will replace
existing third-party leased facilities, annual lease and utilities expense will
be approximately $4,700,000 compared to approximately $8,100,000 incurred in
lease and utilities expense for these 27 facilities in the year ended December
31, 1999. This decrease is due primarily to a 26% reduction in available space
combined with lower lease rates due to longer lease terms and changes in the
nature of the leased space.
During 1998 and 1997, Orangeco incurred significant general and
administrative costs related to recruiting and training personnel, equipment,
computer software and professional fees in organizing this business. In 1999 and
1998, Orangeco incurred $0.9 million and $0.4 million, respectively, in general
and administrative expense with respect to terminated leases in closed
facilities. Management expects that general and administrative expense (prior to
lease termination expense) will increase in 2000 and beyond, due primarily to
costs associated with Orangeco's operating as a separate publicly held
corporation.
Until the Portable Self-Storage Operations are operating profitably,
these operations are expected to continue to adversely impact Orangeco's
earnings and cash flow. Orangeco believes that the portable self-storage
business is likely to be more successful in certain markets than in others.
There can be no assurance as to the level of the Portable Self-Storage
Operations' expansion, level of gross rentals, level of move-outs or
profitability.
Analysis of facilities in place at December 31, 1999:
- -----------------------------------------------------
As indicated above, due to the start-up nature of the business, the
Portable Self-Storage Operations have not been profitable since inception.
During 1997 and 1998, Orangeco expanded the business rapidly. In 1999, Orangeco
evaluated the business activities of all the facilities and decided to exit
certain non-strategic markets and to consolidate the operations of many
facilities into existing facilities within the same market. As a result, at
December 31, 1999, Orangeco had 36 facilities in operation representing the core
strategic facilities going forward. In order to evaluate the viability of the
portable self-storage business, management evaluates the operating results of
the 36 open facilities that Orangeco operates at December 31, 1999, all of which
have been opened since January 1, 1999.
21
<PAGE>
The following chart sets forth the operating results of these 36
facilities (dollar amounts in thousands, except per-container amounts):
<TABLE>
<CAPTION>
Facilities in place at December 31, 1999
(36 facilities):
- ----------------------------------------
Pro Forma, including impact
of leasing arrangement with
Public Storage Historical Actuals
---------------------------- ---------------------------
3 Months 12 Months 3 Months 12 Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1999 1999 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Rental and other income .................. $ 7,438 $25,135 $ 7,438 $25,135
Expenses:
Direct operating costs................ 4,655 16,444 4,655 16,444
Marketing and advertising............. 336 1,256 336 1,256
Facility lease expense................ 1,396 5,615 2,222 9,015
Depreciation and amortization......... 1,278 4,715 1,278 4,715
------------ ------------ ------------ ------------
Total expenses 7,665 28,030 8,491 31,430
------------ ------------ ------------ ------------
Operating losses.......................... $ (227) $(2,895) $(1,053) $(6,295)
============ ============ ============ ============
Weighted average:
Occupied containers................... 57,379 52,415 57,379 52,415
Monthly rent per occupied container... $38.43 $36.85 $38.43 $36.85
</TABLE>
Orangeco believes that the operations of these 36 facilities will
continue to improve during 2000 primarily due to improvements in occupancy
levels and reductions in third party lease expense. As indicated above, Public
Storage is currently constructing facilities that will be partially leased to
Orangeco to operate its portable self-storage business. Many of the facilities
in construction will replace existing facilities that have been leased from
third parties. Of the 36 facilities in operation at December 31, 1999, 31 were
leased of which 27 are identified to be replaced by facilities being developed
by Public Storage. For the 27 facilities developed by Public Storage that will
replace existing third-party leased facilities, annual lease expense will be
approximately $4,700,000, which will include utilities, as compared to
approximately $8,100,000 incurred in lease expense and utilities in the
Historical Actuals with respect to these 27 facilities in the year ended
December 31, 1999 - the Pro Forma presentation above includes the impact of this
leasing arrangement. The pro-forma decrease in facility lease expense is due
primarily to a 26% reduction in available space combined with lower lease rates
primarily due to longer lease terms and changes in the nature of the leased
space.
Many of the facilities that Public Storage will lease to Orangeco are
currently being developed and are expected to be available for occupancy over
the next twelve months. In many instances, it is anticipated that Orangeco will
vacate facilities that are leased from third parties prior to the expiration of
the lease term and occupy these newly developed Public Storage facilities. In
such instances, Public Storage will assume the lease obligation to the third
parties. Once Public Storage assumes these leases, Orangeco will no longer have
any obligations, contingent or otherwise, with respect to these leases. Once all
the 27 replacement facilities in development have been completed and are leased
to Orangeco, the capacity of the 36 facilities is expected to be approximately
66,400 containers. There can be no assurance that Orangeco will meet these
targets.
Truck Operations
----------------
At many Public Storage mini-warehouses, Orangeco offers truck rentals
to the general public, including mini-warehouse tenants.
Orangeco has contracted with Penske Truck Leasing Co. to supply trucks
and to assist in the operations of the truck rental program. Penske both leases
trucks to Orangeco and makes available additional trucks as to which Orangeco
earns rental commissions. Orangeco, Penske and Public Storage cooperate in
cross-marketing, incentive and promotional arrangements and in joint advertising
efforts, including yellow page adverting in telephone directories, newspaper and
other print advertisements. Orangeco and Public Storage jointly use a national
telephone reservation system, which supports truck rental activity in all
markets in which truck rentals are offered.
22
<PAGE>
The following table summarizes the truck operations of Orangeco for
each of the past three years:
<TABLE>
<CAPTION>
Truck operations
- ----------------
Year Ended December 31, Dollar Year Ended December 31, Dollar
1999 1998 Change 1998 1997 Change
---------- --------- ------ -------- ------- ------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Leased truck rentals .............. $ 2,259 $ 1,467 $ 792 $1,467 $ 849 $ 618
Truck rental commissions........... 1,321 686 635 686 393 293
--------- --------- ------ ------ ------- -----
Total revenues 3,580 2,153 1,427 2,153 1,242 911
--------- --------- ------ ------ ------- -----
Cost of operations:
Truck operating expenses....... 2,477 1,627 850 1,627 923 704
Other operating expenses....... 750 376 374 376 358 18
--------- --------- ------ ------ ------- -----
Total cost of operations 3,227 2,003 1,224 2,003 1,281 722
--------- --------- ------ ------ ------- -----
353 150 203 150 (39) 189
Depreciation....................... 31 31 - 31 23 8
--------- --------- ------ ------ ------- -----
Operating income (loss)............ $ 322 $ 119 $ 203 $ 119 $ (62) $ 181
========= ========= ====== ====== ======= =====
Number of trucks operated:
At beginning of period.......... 158 118 118 65
At end of period ............... 249 158 158 118
</TABLE>
The increase in operations from 1997 through 1999 is principally the
result of Public Storage's retail expansion program, which Public Storage
implemented in order to attract a wider variety of customers, further
differentiate Public Storage from its competitors, and generate new sources of
revenues. Orangeco's truck operations have increased as a result of Public
Storage's retail expansion program, as the level of commissions and truck
rentals has increased.
Competition among truck rental operators is intense with several
national companies and many local operators offering truck rentals. Truck
rentals are offered at many mini-warehouses that compete with Public Storage.
Orangeco believes that its cross-marketing arrangements with Public Storage
should enable Orangeco to compete effectively.
Other Income and Expense Items
- ------------------------------
Interest and other income includes the net results of merchandise sales
at the portable self-storage locations and interest income on cash balances.
Included in interest and other income is $164,000, $119,000 and $74,000 in
income (gross sales less cost of merchandise sold) from the sale of merchandise
in 1999, 1998, and 1997, respectively. The increases in income from merchandise
sales are due primarily to increased volume in merchandise sales. Included in
interest and other income is $75,000, $22,000 and $1,000 in interest income from
cash balances in 1999, 1998, and 1997, respectively. The increases in interest
income from cash balances are primarily attributable to changes in the levels of
interest-earning cash balances.
Interest expense reflects interest on advances from Public Storage, and
is net of capitalized interest of $50,000, $497,000, and $85,000 in 1999, 1998,
and 1997, respectively. Increased interest expense in 1998 as compared to 1997
primarily reflects increased average outstanding borrowings.
Loss on disposition of equipment in 1998 was $640,000, and was
attributable to the sale of equipment associated with the closure of several
portable self-storage facilities in 1998.
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
After the distribution, Orangeco will continue to have significant
relationships with Public Storage. See "Arrangements Between Orangeco and Public
Storage - Intercompany Operating Agreements." Orangeco has significant working
capital and cash flow requirements. Since Orangeco's organization these
requirements have been met by Public Storage.
23
<PAGE>
Until the portable self-storage facilities are operating profitably,
operations of these facilities are expected to continue to impact Orangeco's
earnings and cash flow adversely. As discussed above the facilities in place at
December 31, 1999 generated approximately $1.1 million in operating losses, or
approximately breakeven prior to depreciation, for the quarter ended December
31, 1999. As Orangeco moves into newly developed facilities leased from Public
Storage, it may incur additional capital needs for equipment and other items.
Therefore, Orangeco believes that the internally generated net cash provided by
operating activities (prior to the impact of the financial arrangements with
Public Storage described below) may not be sufficient to enable it to fund any
capital requirements for fiscal 2000.
However, in connection with the distribution, Orangeco has entered into
the following agreements with Public Storage to enhance Orangeco's liquidity and
capital resources:
o Public Storage will contribute approximately $30 million of cash prior
to the distribution.
o Advances from Public Storage will be converted into equity of Orangeco.
o Upon completion of a facility that replaces an existing facility,
Public Storage agrees to assume Orangeco's lease for the replaced
facility. This agreement will result in a substantial decrease in lease
payments as each facility is replaced by Public Storage developed
facilities. For the 27 facilities being developed by Public Storage
that will replace existing third-party leased facilities, annual lease
and utilities expense will be approximately $4,700,000 as compared to
approximately $8,100,000 incurred in lease and utilities expense for
these 27 facilities in the year ended December 31, 1999. This decrease
is due primarily to a 26% reduction in available space combined with
lower lease rates primarily due to longer lease terms and changes in
the nature of the leased space.
In addition to these agreements with Public Storage, Orangeco will
attempt to obtain a bank line of credit, which it believes it can obtain on
satisfactory terms. However, at the time of the distribution, Orangeco will not
have an agreement or understanding with a financial institution, and there can
be no assurance that satisfactory arrangements can be made.
If the agreements with Public Storage were insufficient and Orangeco
were unable to obtain a bank line of credit on satisfactory terms, Orangeco
would consider sale of its real estate assets to meet its liquidity
requirements.
Impact of the Year 2000
- --------------------------------------------------------------------------------
Orangeco's utilizes Public Storage's information systems in connection
with a cost sharing and administrative services agreement.
Any of Orangeco's computer programs or hardware with the Y2K Issue that
have date-sensitive applications or embedded chips could have recognized a date
using "00" as the year 1900 rather than the year 2000. The same issue has been
faced by Orangeco's outside vendors, including those vendors in the banking and
payroll processing areas. Any failure in these areas could result in disruptions
in operations.
As a result of Public Storage's assessment and remediation activities
conducted in recent years, Orangeco experienced no significant disruptions in
its operations, and believes that its information systems responded successfully
to the Year 2000 date change.
At this time, Orangeco is not aware of any material problems that
resulted from the Year 2000 date change at any of its outside vendors, including
those vendors in the banking and payroll processing areas.
Orangeco will continue to monitor its information systems and those of
its outside vendors throughout the year 2000 to ensure that any latent Year 2000
matters that may arise are addressed promptly.
There can be no assurance that Orangeco has identified all potential
Y2K Issues either within the Public Storage information systems, at its outside
vendors, or at external agents. In addition, the impact of any unresolved or
unidentified Y2K issues on governmental entities and utility providers and the
resultant impact on Orangeco, as well as disruptions in the general economy, may
be material but cannot be reasonably determined or quantified.
24
<PAGE>
MANAGEMENT OF ORANGECO
Directors of Orangeco
- ---------------------
The following table lists the persons expected to serve as directors of
Orangeco immediately following the distribution. Each director will serve until
the next annual meeting of shareholders of Orangeco and until his or her
successor is elected and qualified.
Name Age Expected Positions with Orangeco
---- --- --------------------------------
B. Wayne Hughes 66 Chairman of the Board, President
and Chief Executive Officer
Tamara Hughes Gustavson 38 Director
Vern O. Curtis 65 Director
Uri P. Harkham 51 Director
Alan K. Pribble 57 Director
B. Wayne Hughes has been President, Chief Executive Officer and a
director of Orangeco since its organization in 1994. He has been a director of
Public Storage, Inc. ("Public Storage") since its organization in 1980 and was
President and Co-Chief Executive Officer from 1980 until November 1991 when he
became Chairman of Board and sole Chief Executive Officer. Mr. Hughes was
Chairman of the Board and Chief Executive Officer from 1990 until March 1998 of
Public Storage Properties XI, Inc., which was renamed PS Business Parks, Inc.
("PS Business Parks"), an affiliated REIT. From 1989-90 until the respective
dates of merger, he was Chairman of the Board and Chief Executive Officer of 18
affiliated REITs that were merged into Public Storage between September 1994 and
May 1998 (collectively, the "Merged Public Storage REITs"). Mr. Hughes has been
active in the real estate investment field for over 30 years. He is the father
of Tamara Hughes Gustavson.
Tamara Hughes Gustavson has been Vice President - Administration of
Public Storage since 1995 and prior to 1995 held the same position with a
predecessor company. She is the daughter of B. Wayne Hughes.
Vern O. Curtis is a private investor who has been a director of PS
Business Parks since its inception in 1990. Mr. Curtis is also a director of the
Pimco Funds, Pimco Commercial Mortgage Securities Trust, Inc. and Fresh Choice,
Inc. From 1989-90 until the respective dates of merger, he was a director of the
Merged Public Storage REITs. Mr. Curtis was Dean of Business School of Chapman
College from 1988 to 1990 and President and Chief Executive Officer of Denny's,
Inc. from 1980 to 1987.
Uri P. Harkham has been a director of Public Storage since March 1993.
Mr. Harkham has been the President and Chief Executive Officer of the Jonathan
Martin Fashion Group, which specializes in designing, manufacturing and
marketing women's clothing, since its organization in 1976. Since 1978, Mr.
Harkham has been the Chairman of the Board of Harkham Properties, a real estate
firm specializing in buying and managing fashion warehouses in Los Angeles.
Alan K. Pribble has been an independent business consultant since June
1997. Mr. Pribble was employed by Wells Fargo Bank, N.A. for 30 years until June
1997. He was a Senior Vice President of Wells Fargo from 1984 until June 1997.
In 1992, Mr. Pribble opened a commercial finance division for Wells Fargo and
was involved in its operations until June 1997. From 1988 until 1992, he was a
Senior Vice President and Regional Manager, and from 1984 until 1988, Mr.
Pribble was a Senior Credit Officer, for Wells Fargo. Mr. Pribble is a director
of PS Business Parks.
25
<PAGE>
Committees of the Orangeco Board
- --------------------------------
The Orangeco Board of Directors will have an Audit Committee consisting
of three non-employee directors. The membership of the Audit Committee will be
determined following the distribution. The primary functions of the Audit
Committee will be to meet with Orangeco's outside auditors, to conduct a
pre-audit review of the audit engagement, to conduct a post-audit review of the
results of the audit, to monitor the adequacy of internal financial controls of
Orangeco, to review the independence of the outside auditors and to make
recommendations to the Board of Directors regarding the appointment and
retention of auditors.
Compensation of Directors
- -------------------------
Each of Orangeco's directors, other than B. Wayne Hughes, will receive
director's fees of $__________ per year plus $__________ for each meeting
attended. In addition, each of the members of the Audit Committee (other than
the chairman, who will receive $__________ per meeting) will receive $__________
for each meeting of the Audit Committee attended. The policy of Orangeco will be
to reimburse directors for reasonable expenses. Orangeco will adopt the 2000
Stock Option and Incentive Plan under which directors who are not officers or
employees of Orangeco ("Outside Directors") will receive grants of options (and
B. Wayne Hughes and Tamara Hughes Gustavson will be eligible to receive grants
of options and/or restricted stock thereunder) as described below. Under the
2000 Stock Option and Incentive Plan, (i) on the date of the distribution, each
Outside Director then duly elected and serving will automatically be granted a
non-qualified option to purchase 15,000 shares of Orangeco common stock and (ii)
thereafter, each new Outside Director will, upon the date of his or her initial
election to serve as an Outside Director, automatically be granted a
non-qualified option to purchase 15,000 shares of Orangeco common stock. In
addition, after each annual meeting of shareholders (commencing with the 2001
annual meeting), each Outside Director then duly elected and serving will be
automatically granted, as of the date of such annual meeting, a non-qualified
option to purchase 2,500 shares of Orangeco common stock, so long as such person
has attended, in person or by telephone, at least 75% of the meetings held by
the Board of Directors during the immediately preceding calendar year. The
options will have an exercise price equal to 100% of the fair market value of
the Orangeco common stock on the date of grant, will vest in three equal annual
installments beginning on the first anniversary of the date of grant and will
have a term of 10 years.
Executive Officers of Orangeco
- ------------------------------
The following table lists the persons expected to serve as executive
officers of Orangeco immediately following the distribution. Each executive
officer of Orangeco will serve at the pleasure of Orangeco's Board of Directors.
Name Age Expected Positions with Orangeco
---- --- --------------------------------
B. Wayne Hughes 66 Chairman of the Board, President
and Chief Executive Officer
Anthony Grillo 44 Senior Vice President
Harvey Lenkin 64 Senior Vice President
Marvin M. Lotz 57 Senior Vice President
Thomas Miller 42 Senior Vice President
John Reyes 39 Senior Vice President and
Chief Financial Officer
A. Timothy Scott 48 Senior Vice President and
General Counsel
Sarah Hass 44 Vice President and Secretary
Biographical information regarding B. Wayne Hughes is set forth above
under "- Directors of Orangeco."
Anthony Grillo joined Public Storage in 1981 and is currently a vice
president of Public Storage and Senior Vice President of the Management Division
with overall responsibility for Public Storage's marketing activities and the
national telephone reservation system. Between 1988 and 1996, Mr. Grillo was a
division manager with overall responsibility for Public Storage's property
management activities in the western United States.
26
<PAGE>
Harvey Lenkin has been President and a director of Public Storage since
November 1991. Mr. Lenkin has been employed by Public Storage for 22 years. He
has been a director of PS Business Parks since March 1998 and was President of
PS Business Parks (formerly Public Storage Properties XI, Inc.) from 1990 until
March 1998. Mr. Lenkin was President of the Merged Public Storage REITs from
1989-90 until the respective dates of merger and was also a director of one of
those REITs from 1989 until June 1996. He is a member of the Board of Governors
of the National Association of Real Estate Investment Trusts, Inc. (NAREIT).
Marvin M. Lotz has been a Senior Vice President of Public Storage since
November 1995 and a director of Public Storage since May 1999. He has had
overall responsibility for Public Storage's mini-warehouse operations since 1988
and had overall responsibility for Public Storage's property acquisitions from
1983 until 1988.
Thomas Miller joined Orangeco in March 1998 with overall responsibility
for truck and retail operations. In 2000 he became a Vice President of Public
Storage and a Senior Vice President of the Management Division. Mr. Miller was
employed by Ryder Transportation Services from 1980 until March 1998, and was
General Manager, Los Angeles for Ryder from 1996 until March 1998.
John Reyes, a certified public accountant, joined Public Storage in
1990 and was Controller of Public Storage from 1992 until December 1996 when he
became Chief Financial Officer. He became a Vice President of Public Storage in
November 1995 and a Senior Vice President of Public Storage in December 1996.
From 1983 to 1990, Mr. Reyes was employed by Ernst & Young.
A. Timothy Scott has been Senior Vice President and Tax Counsel of
Public Storage since November 1996. From June 1991 until joining Public Storage,
he practiced tax law as a shareholder of the law firm of Heller, Ehrman, White
and McAuliffe, counsel to Public Storage. Prior to June 1991, his professional
corporation was a partner in the law firm of Sachs & Phelps, then counsel to
Public Storage.
Sarah Hass has been Secretary of Public Storage since February 1992 and
a Vice President of Public Storage since November 1995. She joined Public
Storage's legal department in June 1991. From 1987 until May 1991, her
professional corporation was a partner in the law firm of Sachs & Phelps, then
counsel to Public Storage, and from April 1986 until June 1987, she was
associated with that firm, practicing in the area of securities law. From
September 1979 until September 1995, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.
Executive Compensation
- ----------------------
No person who was an executive officer of Orangeco during 1999 received
compensation from Orangeco in excess of $100,000 in 1999. B. Wayne Hughes, who
was during 1999, and who is expected to be immediately following the
distribution, the chief executive officer of Orangeco, received no cash
compensation from Orangeco and received no awards of stock or options from
either Orangeco or Public Storage during 1999. Mr. Hughes is not expected to
receive any cash compensation or awards of stock or options from Orangeco during
2000. Anthony Grillo and Thomas Miller, who will become executive officers of
Orangeco prior to the distribution, are expected to receive from Orangeco,
during 2000, cash compensation of $__________ and $__________, respectively. No
other executive officer of Orangeco is expected to be paid more than $100,000
from Orangeco during 2000.
Orangeco 2000 Stock Option and Incentive Plan
- ---------------------------------------------
General
-------
Prior to the distribution, the Board of Directors and shareholders of
Orangeco will adopt the Orangeco 2000 Stock Option and Incentive Plan (the "2000
Plan") for the benefit of employees of Orangeco and its subsidiaries (including
any employee who is an officer or director of Orangeco or any of its
subsidiaries), key Service Providers (as defined below) and Outside Directors.
Orangeco will reserve for issuance 1,000,000 shares under the 2000 Plan. The
2000 Plan provides for the grant of incentive stock options ("ISOs"), intended
to qualify as such under Section 422 of the Code, and nonstatutory stock options
which do not so qualify. The 2000 Plan also provides for the grant of restricted
stock and restricted stock units to eligible persons. The persons who will
receive grants of awards under the 2000 Plan and the timing, nature and amount
of awards to grantees will be determined from time to time by the Orangeco Board
of Directors or an authorized committee of the Board of Directors. Grants of
options to the Outside Directors will be automatic in accordance with a formula
contained in the 2000 Plan.
27
<PAGE>
Description of the 2000 Plan
----------------------------
Administration. The 2000 Plan will be administered by Orangeco's Board
of Directors or one or more committees designated by Orangeco's Board of
Directors from time to time (the "Committee"). Subject to the limitations set
forth in the 2000 Plan, the Committee will have the authority to determine,
among other things: (i) to which eligible persons options, restricted stock and
restricted stock units will be granted, (ii) the type or types of grants to be
made, (iii) the number of shares subject to each grant, and (iv) the terms and
conditions of the options, restricted stock and restricted stock units. For
grants to Outside Directors, the 2000 Plan is intended to be a "formula plan,"
and, accordingly, the Committee will have no discretion in establishing the
material terms of such grants. Subject to the express provisions of the 2000
Plan, the Committee will have the full authority to administer and interpret the
2000 Plan.
Eligibility.
Discretionary Grants. The Committee will have discretion to grant
options, restricted stock and/or restricted stock units under the 2000 Plan to
(i) employees (including officers and directors) of Orangeco and of any
"subsidiary" of Orangeco (within the meaning of Section 425(f) of the Code), as
designated from time to time by the Committee, and (ii) any individual who is a
consultant or adviser to Orangeco, a manager of Orangeco's properties or
affairs, or other similar service provider or affiliate of Orangeco ("Service
Providers"). Subject to restrictions set forth in the 2000 Plan, an eligible
person may receive successive grants of options, restricted stock and/or
restricted stock units.
Formula Plan for Outside Directors. Under the 2000 Plan, (i) on the
date of the distribution, each Outside Director then duly elected and serving
will automatically be granted a nonstatutory stock option to purchase 15,000
shares of Orangeco common stock and (ii) thereafter, each new Outside Director
will, upon the date of his or her initial election by the Board of Directors or
the shareholders of Orangeco to serve as an Outside Director, automatically be
granted a nonstatutory stock option to purchase 15,000 shares of Orangeco common
stock. In addition, after each annual meeting of shareholders (commencing with
the 2001 annual meeting), each Outside Director then duly elected and serving
will automatically be granted, as of the date of such annual meeting, a
nonstatutory stock option to purchase 2,500 shares of Orangeco common stock, so
long as such Outside Director has attended, in person or by telephone, at least
75% of the meetings held by Orangeco Board of Directors during the immediately
preceding calendar year. The Committee has no discretion to alter the foregoing
provisions of the 2000 Plan governing options granted to Outside Directors.
Currently, three Outside Directors are expected to be eligible to receive option
grants under the 2000 Plan.
Shares Subject to the Plan. Under the terms of the 2000 Plan, 1,000,000
authorized but unissued shares of Orangeco common stock will be reserved for
issuance. In the event any change is made to the Orangeco common stock subject
to the 2000 Plan (whether by reason of recapitalization, reclassification, stock
split, reverse split, combination of shares, exchange of shares, stock dividend,
or other increase, decrease or change in such shares), the Orangeco Board of
Directors will adjust proportionately and accordingly the number and kinds of
shares that may be purchased. Any such adjustment in an outstanding option,
however, will be made without a change in the total price applicable to the
unexercised portion of the option but with a corresponding adjustment in the per
share option price.
Options.
General. All options granted under the 2000 Plan are intended to be
treated as nonstatutory stock options, unless the Committee specifically
designates a stock option as an ISO within the limitations of the 2000 Plan. The
option exercise price of options granted under the 2000 Plan will be determined
by the Committee in accordance with the 2000 Plan. For both ISOs and
nonstatutory options, the exercise price per share (the "Option Price") will be
equal to 100% of the fair market value (determined in accordance with the 2000
Plan) of a share of Orangeco common stock upon the date of grant (but not less
than the par value per share). No person may receive an ISO if, at the time of
grant, such person owns directly or indirectly more than 10% of the total
combined voting power of Orangeco, unless the option price is at least 110% of
the fair market value of Orangeco common stock and the exercise period of such
ISO is limited to five years. There is also a $100,000 limit on the value of
stock (determined at the time of grant) with respect to which ISOs granted to an
optionee may first become exercisable in any calendar year. The maximum number
of shares subject to options that can be granted under the 2000 Plan to any
executive officer, other employee or Service Provider of Orangeco or any
subsidiary is 1,000,000 shares during the first ten years of the 2000 Plan.
Shares underlying any option that expires unexercised will again be available
for grant under the 2000 Plan.
28
<PAGE>
Vesting. Unless otherwise provided in the applicable option agreement,
each option granted under the 2000 Plan will vest in three equal annual
installments beginning on the first anniversary of the date of grant, subject to
acceleration of vesting under certain circumstances or (except in the case of
options granted to Outside Directors) in the discretion of the Committee. Each
option granted to an Outside Director under the 2000 Plan will vest in three
equal annual installments beginning on the first anniversary of the date of
grant, subject to acceleration of vesting under certain circumstances. Subject
to certain limitations, options will remain exercisable for ten years from the
date of grant. Options will expire prior to their scheduled termination upon the
30th day after termination of the optionee's employment or service relationship
with Orangeco (other than, for individuals, by reason of death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended)). Special rules will govern the vesting and
expiration of options following the death or "permanent and total disability" of
an optionee. The Committee may extend the period during which an option (other
than an option granted to an Outside Director) may be exercised (but not later
than the date the option would otherwise expire).
Transferability. Options granted under the 2000 Plan are exercisable
only by the optionee or his or her permitted transferees during the optionee's
lifetime. Options are transferable by the optionee only as provided in the
agreement evidencing the grant or as may be provided by will or the laws of
descent and distribution.
Payment of Option Price. Payment for shares purchased under the 2000
Plan may be made in cash or cash equivalents, by exchanging shares of Orangeco
common stock valued at their fair market value on the date of exercise, or by a
combination of the foregoing. An optionee also may pay the exercise price by
directing that certificates for the shares purchased upon exercise be delivered
to a licensed broker acceptable to Orangeco as agent for the optionee, and that
the broker tender to Orangeco cash or cash equivalents equal to the option
exercise price plus the amount of any taxes that Orangeco may be required to
withhold in connection with the exercise of the option.
Restricted Stock and Restricted Stock Units. The Committee may grant to
eligible persons (but not to Outside Directors) shares of Orangeco common stock
(or units representing shares of Orangeco common stock) subject to vesting based
on the passage of time, the achievement by the grantee or Orangeco of specified
performance objectives, or other conditions deemed appropriate by the Committee.
The Committee will establish the conditions to vesting, and the period of time
during which the conditions will apply (the "Restricted Period"), at the time of
grant.
Any applicable performance objectives will be established in writing by
the Committee prior to March 31 of the year in which the grant is made and while
the outcome is substantially uncertain. Performance objectives will be based on
stock price, market share, sales, earnings per share, return on equity or costs,
and may include positive results, maintaining the status quo or limiting
economic losses. During the Restricted Period, restricted stock or restricted
stock units may not be transferred by the employee. In its discretion, the
Committee may shorten or terminate the Restricted Period or waive any other
restrictions applicable to the award.
If the termination of a grantee's employment or service relationship
with Orangeco occurs during the Restricted Period, the award will be forfeited
unless the Committee, in its discretion, determines otherwise. Special rules
will apply to the vesting of an award upon the death or "permanent and total
disability" of a grantee. Any shares of restricted stock that are forfeited will
again be available for award under the 2000 Plan. The maximum number of shares
of restricted stock, or shares represented by restricted stock units, that can
be granted under the 2000 Plan to any eligible person is 250,000 shares per
year.
The Committee may, in the agreement evidencing a grant of restricted
stock or restricted stock units, provide that the grantee will be entitled to
vote and to receive dividends on the shares of common stock subject to the
award. Upon vesting of an award of restricted stock or restricted stock units,
including the satisfaction, lapse or waiver of all applicable restrictions and
conditions, the grantee will be entitled to receive a stock certificate
representing the vested shares. The shares will be issuable to the grantee free
of charge, other than payment of the par value of such shares.
Termination of the 2000 Plan. There is no specified termination date
for the 2000 Plan, which may be terminated by the Board of Directors at any
time. However, no ISOs may be granted under the 2000 Plan after the tenth
anniversary of the date of Board approval of the 2000 Plan.
29
<PAGE>
Annual Meeting
- --------------
Orangeco's Bylaws provide that Orangeco's annual meeting of
shareholders will be held within 15 months of the preceding annual meeting of
shareholders. The first annual meeting for which proxies will be solicited from
shareholders will be held in 2001.
30
<PAGE>
SECURITY OWNERSHIP OF ORANGECO COMMON STOCK BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
The following table sets forth information with respect to persons that
are expected to beneficially own more than 5% of the Orangeco common stock
outstanding immediately following the distribution, based upon the ownership of
Public Storage common stock and class B common stock as known to Orangeco:
Shares of Orangeco Common
Stock Beneficially Owned
-------------------------------
Percent
Name and Address Number of Shares of Class(1)
---------------- ---------------- -----------
B. Wayne Hughes, Tamara Hughes Gustavson, 2,243,769 30.8%
B. Wayne Hughes, Jr.
701 Western Avenue
Glendale, California 91201-2349,
PS Insurance Company, Ltd., a Bermuda
corporation ("PSIC")
41 Cedar Avenue
Hamilton, Bermuda(2)
Public Storage, Inc. 691,715 9.5%
701 Western Avenue
Glendale, California 91201-2349(3)
FMR Corp. 607,331 8.3%
82 Devonshire Street
Boston, Massachusetts 02109(4)
- ---------------
(1) The total number of shares of Orangeco common stock expected to be
outstanding following the distribution has been determined based on the
number of outstanding shares of Public Storage common stock and class B
common stock as of May 1, 2000.
(2) This information is based on the ownership by the persons listed above
of Public Storage common stock and class B common stock as of May 1,
2000. The stock of PSIC is owned approximately 45% by B. Wayne Hughes,
47% by Tamara Hughes Gustavson (an adult daughter of B. Wayne Hughes)
and 8% by B. Wayne Hughes, Jr. (an adult son of B. Wayne Hughes). B.
Wayne Hughes and Tamara Hughes Gustavson share voting and dispositive
power with respect to 15,051 shares expected to be owned by PSIC. B.
Wayne Hughes disclaims beneficial ownership of the shares expected to be
owned by Tamara Hughes Gustavson and B. Wayne Hughes, Jr. (B. Wayne
Hughes, Jr. is expected to own an aggregate of 207,773 shares). Each of
the other persons listed above disclaims beneficial ownership of the
shares expected to be owned by any other person listed above.
(3) The 691,715 shares has been determined based on 9.5% of the total number
of shares of Orangeco common stock expected to be outstanding following
the distribution (see footnote 1).
(4) This information is based on the ownership by FMR Corp. of Public
Storage common stock as of December 31, 1999 as set forth in a Schedule
13G (Amendment No. 6) filed by FMR Corp. The 607,331 shares is expected
to include 529,944 shares beneficially owned by Fidelity Management &
Research Company, as a result of its serving as investment adviser to
several investment companies registered under Section 8 of the
Investment Company Act of 1940, and 77,387 shares beneficially owned by
Fidelity Management Trust Company, as a result of its serving as
investment manager of various institutional accounts. FMR Corp. is
expected to have sole voting power with respect to 72,132 shares and
sole dispositive power with respect to 607,331 shares.
31
<PAGE>
Security Ownership of Management
- --------------------------------
The following table sets forth information concerning the expected
beneficial ownership of the Orangeco common stock following the distribution of
each person who is expected to be a director of Orangeco following the
distribution (including B. Wayne Hughes, the chief executive officer of
Orangeco) and all persons expected to be directors and executive officers of
Orangeco following the distribution, as a group, based upon the ownership by
such persons of Public Storage common stock and class B common stock as of May
1, 2000:
Shares of Orangeco Common
Stock Beneficially Owned(1)
-----------------------------------
Name Number of Shares Percent(2)
---- ---------------- ----------
B. Wayne Hughes 1,014,299(1)(3) 13.9%
Tamara Hughes Gustavson 1,021,697(1)(4) 14.0%
Vern O. Curtis 150(1) *
Uri P. Harkham 20,794(1)(5) 0.3%
Alan K. Pribble 229(1)(6) *
All Directors and Executive Officers 2,092,003(1)(3)(4)(5)(6)(7) 28.7%
as a Group (12 persons)
- ---------------
* Less than 0.1%.
(1) Except as otherwise indicated and subject to applicable community
property and similar statutes, the persons listed as beneficial owners
of the shares are expected to have sole voting and investment power
with respect to such shares.
(2) The total number of shares of Orangeco common stock expected to be
outstanding following the distribution has been determined based on the
number of outstanding shares of Public Storage common stock and class B
common stock as of May 1, 2000.
(3) Includes 997,299 shares expected to be held of record by the B.W.
Hughes Living Trust as to which Mr. Hughes has voting and investment
power, 71 and 71 shares expected to be held by custodians of IRAs for
Mr. Hughes and Mrs. Hughes as to which each has investment power and
269 shares expected to be held by Mrs. Hughes as to which she has
investment power. Also includes 1,538 shares expected to be held of
record by a corporation controlled by Mr. Hughes as to which he has
voting and dispositive power and 15,051 shares expected to be held of
record by PSIC as to which Mr. Hughes and Tamara Hughes Gustavson share
voting and dispositive power.
(4) Includes 71 shares expected to be held by a custodian of an IRA for
Tamara Gustavson as to which she has investment power, 65 shares
expected to be held by Mr. Gustavson as to which he has investment
power, 95 shares expected to be held by Tamara Gustavson as custodian
for a son, 894 and 894 shares expected to be held by Mr. Gustavson as
custodian for a daughter and a son and 567 shares expected to be held
by Tamara Gustavson and B. Wayne Hughes, Jr. - Separate Property.
Excludes 15,051 shares expected to be held by PSIC as to which Tamara
Gustavson and B. Wayne Hughes share voting and dispositive power; such
shares are included under Mr. Hughes above (see footnote 3).
(5) Includes 17,407 shares expected to be held by Harkham Industries, Inc.
(dba Jonathan Martin, Inc.), a corporation wholly owned by Mr. Harkham,
2,206 shares expected to be held by Mr. Harkham as trustee of Uri
Harkham Trust, 72 shares expected to be held by a custodian of an IRA
for Mr. Harkham as to which he has investment power, 193, 225, 222, 230
and 235 shares expected to be held by Mr. Harkham as custodian for five
of his children and 4 shares expected to be held by a custodian of an
IRA for Mr. Harkham's son.
(6) Includes 10 and 8 shares expected to be held by custodians of IRAs for
Mr. Pribble and Mrs. Pribble as to which each has investment power.
(7) Includes shares expected to be held of record or beneficially by
members of the immediate family of executive officers of Orangeco and
shares expected to be held by custodians of IRAs for the benefit of
executive officers of Orangeco.
32
<PAGE>
DESCRIPTION OF ORANGECO CAPITAL STOCK
General
- -------
Prior to the distribution, Orangeco's articles of incorporation and
bylaws will be amended. The amended and restated articles of incorporation will
provide that Orangeco is authorized to issue 200,000,000 shares of common stock,
par value $.10 per share, 50,000,000 shares of preferred stock, par value $.01
per share and 200,000,000 shares of equity stock, par value $.01 per share.
Immediately after the distribution, based on the number of shares of common
stock and class B common stock of Public Storage outstanding at _______________,
2000, approximately ___________ shares of common stock of Orangeco and no shares
of preferred stock or equity stock of Orangeco will be issued and outstanding.
The following description of Orangeco's capital stock is general. The forms of
Orangeco's amended and restated articles of incorporation and amended and
restated bylaws are filed as exhibits to Orangeco's registration statement on
Form 10 of which this information statement is a part.
Orangeco Common Stock
- ---------------------
Holders of Orangeco common stock will be entitled to receive dividends
when, as and if declared by Orangeco's board of directors, out of funds legally
available therefor. Payment and declaration of dividends on, and repurchases of,
Orangeco common stock will be subject to certain restrictions if Orangeco fails
to pay dividends on outstanding preferred stock. See "- Preferred Stock." Upon
any liquidation, dissolution or winding up of Orangeco, holders of Orangeco
common stock will be entitled to share equally and ratably in any assets
available for distribution to them, after payment or provision for payment of
the debts and other liabilities of Orangeco and the preferential amounts owing
with respect to any outstanding preferred stock. Holders of Orangeco common
stock have no preemptive rights, which means they have no right to acquire any
additional shares of Orangeco common stock that may be issued by Orangeco at a
subsequent date.
Each outstanding share of Orangeco common stock entitles the holder to
one vote on all matters presented to holders of Orangeco common stock for a
vote, with the exception that holders of Orangeco common stock have cumulative
voting rights with respect to the election of Orangeco's board of directors, in
accordance with California law. Cumulative voting entitles each holder of
Orangeco common stock to cast as many votes as there are directors to be elected
multiplied by the number of shares registered in his or her name. A holder of
Orangeco common stock may cumulate the votes for directors by casting all of the
votes for one candidate or by distributing the votes among as many candidates as
the holder of Orangeco common stock chooses.
Preferred Stock
- ---------------
Orangeco's amended and restated articles of incorporation will provide
that Orangeco is authorized to issue 50,000,000 shares of preferred stock, $.01
par value per share. The amended and restated articles of incorporation will
provide that the preferred stock may be issued from time to time in one or more
series and give its board of directors broad authority to fix the dividend,
conversion and voting rights, if any, redemption provisions and liquidation
preferences of each series of preferred stock. Orangeco will have no outstanding
shares of preferred stock immediately following the distribution.
Equity Stock
- ------------
Orangeco's amended and restated articles of incorporation will provide
that Orangeco is authorized to issue 200,000,000 shares of equity stock, $.01
par value per share. The amended and restated articles of incorporation will
provide that the equity stock may be issued from time to time in one or more
series and give Orangeco's board of directors broad authority to fix the
dividend, conversion and voting rights, redemption provisions and liquidation
rights of each series of equity stock. Orangeco will have no outstanding shares
of equity stock immediately following the distribution.
Effects of Issuance of Capital Stock
- ------------------------------------
The issuance of Orangeco common stock and the issuance of preferred
stock or equity stock with special voting rights could be used to deter attempts
by a single shareholder or group of shareholders to obtain control of Orangeco
in transactions not approved by Orangeco's board of directors. Orangeco has no
intention to issue Orangeco common stock or its preferred stock or equity stock
for such purposes.
33
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations relating to the distribution of Orangeco common stock. The
following discussion is not exhaustive of all possible tax considerations and
does not give a description of any state, local, or foreign tax considerations.
Nor does it discuss all of the aspects of federal income taxation that may be
relevant to a shareholder in light of his or her particular circumstances or to
certain types of shareholders (including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) who are subject
to special treatment under federal income tax laws. The information in this
section is based on the Code, current, temporary and proposed treasury
regulations, the legislative history of the Code, current administrative
interpretations and practices of the IRS (including its practices and policies
as endorsed in private letter rulings, which are not binding on the IRS except
with respect to the taxpayer that receives such a ruling), and court decisions,
all as of the date of this information statement. No assurance can be given that
future legislation, treasury regulations, administrative interpretations and
court decisions will not significantly change current law or adversely affect
existing interpretations of current law. Any such change could apply
retroactively to transactions preceding the date of the change. Public Storage
have not requested and do not plan to request any rulings from the IRS
concerning the distribution or the future tax treatment of Public Storage or
Orangeco. Thus, no assurance can be provided that the statements below (which do
not bind the IRS or the courts) will not be challenged by the IRS or will be
sustained by a court if so challenged.
EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER TAX ADVISOR,
REGARDING THE TAX CONSEQUENCES TO HIM OR HER OF THE DISTRIBUTION, AND THE
OWNERSHIP AND SALE OF ORANGECO SHARES, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES.
Taxation of Public Storage In General. The tax rules governing REITs
are highly technical and require continuous compliance with a variety of tests
that, among other things, restrict the nature of a REIT's income and assets and
mandate specified levels of distributions. Public Storage elected to be taxed as
a REIT for federal income tax purposes, commencing with its taxable year ended
December 31, 1981. Public Storage believes that it has been organized and
operated in a manner so as to qualify as a REIT, and intends to continue to
operate in such a manner. No assurance, however, can be given that Public
Storage has qualified, or will continue to qualify, as a REIT for any particular
taxable year.
Taxation of the Distribution. You will be taxable on the distribution
in 2000, if you are subject to income tax. You will be taxable at ordinary
income rates as if you had received cash equal to the sum of the fair market
value of the shares received and the amount of any cash received in lieu of
fractional shares, and will take a tax basis in the distributed shares equal to
the reported value of the shares received. Public Storage will report to the IRS
and the shareholders the amount of income received by the shareholders, based on
Public Storage's board of directors' estimate of the fair market value of the
distributed shares. No assurance can be given that the IRS will agree with that
valuation.
The distribution also will be a taxable transaction for Public Storage,
which will recognize gain to the extent that the fair market value of the
distributed Orangeco common stock exceeds Public Storage's tax basis in the
distributed shares. The aggregate amount of gain is estimated to be $__________.
Public Storage also will claim a dividends-paid deduction for tax purposes in
2000 equal to the fair market value of the distributed Orangeco common stock (in
the same amount per share as taxable shareholders would report as taxable income
when they receive the distribution) and the amount of cash paid in lieu of
fractional shares. That deduction will be taken into account by Public Storage
along with its other distributions in seeking to satisfy the distribution
requirements applicable to Public Storage as a REIT.
Taxation Following the Distribution. Following the distribution,
Orangeco and Public Storage will operate as separate corporate entities.
Although the ownership of the two companies will be the same immediately
following the distribution, the shares of the two will trade separately and will
not be "paired" or "stapled."
Orangeco will continue to be separately taxable as a regular "C"
corporation on its separate income. Shareholders of Orangeco will be treated as
are the shareholders of regular "C" corporations. Public Storage will seek to
continue its tax status as a REIT, and its shareholders would continue to be
subject to the treatment generally accorded to the shareholders of REITs.
34
<PAGE>
Following the distribution, Public Storage and Orangeco will be parties
to various agreements, and may become parties to future agreements. While the
parties expect to structure those arrangements in a reasonable manner that
involves arm's-length terms, there can be no assurance that the IRS will agree.
It is possible that the IRS may seek to reallocate items of income or expense
between the parties, or otherwise recharacterize the dealings between the
parties, in a fashion that may adversely affect Orangeco, Public Storage, both
entities or their shareholders.
35
<PAGE>
LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION
Orangeco's articles of incorporation limit the personal liability of
Orangeco's directors to Orangeco and its shareholders for money damages to the
maximum extent permitted by California law. As a result, Orangeco cannot hold
its directors personally liable for monetary damages if they acted in good
faith, with a reasonable belief that they were acting in Orangeco's best
interest.
Orangeco's articles of incorporation also provide that Orangeco may
indemnify its agents to the maximum extent permitted under California law.
Orangeco has entered into indemnity agreements with its directors and executive
officers.
The agreements permit Orangeco to indemnify directors and executive
officers to the maximum extent permitted under California law and prohibit
Orangeco from terminating its indemnification obligations as to acts or
omissions of any director or executive officer occurring before the termination.
The indemnification and limitations on liability permitted by the amendment to
the articles of incorporation and the agreements are subject to the limitations
set forth by California law.
Orangeco has also purchased insurance for the benefit of its officers
and directors in order to protect them against liability, including with respect
to the foregoing indemnities. Orangeco believes the indemnification agreements
and insurance will assist it in attracting and retaining qualified individuals
to serve as directors and executive officers of Orangeco.
36
<PAGE>
HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS OF ORANGECO
PAGE
HISTORICAL FINANCIAL STATEMENTS
- -------------------------------
Report of Independent Auditors F-1
Combined Statements of Assets, Liabilities and Deficit F-2
Combined Statements of Operations F-3
Combined Statements of Cash Flows F-4
Notes to Combined Financial Statements F-5 - F-11
Schedule III - Real Estate and Accumulated Depreciation F-12
PRO FORMA FINANCIAL STATEMENTS F-13
- ------------------------------
Pro Forma Combined Balance Sheet F-14
Notes to Pro Forma Combined Balance Sheet F-15 - F-16
Pro Forma Combined Statements of Operations F-17
Notes to Pro Forma Combined Statements of Operations F-18 - F-19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Shareholders
Public Storage, Inc.
We have audited the accompanying combined statements of
assets, liabilities, and deficit of the portable self-storage and truck
operations of Public Storage, Inc. and its affiliates (collectively,
"Orangeco"), at December 31, 1999 and 1998, and the related combined statements
of operations and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of
Orangeco's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Orangeco at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Los Angeles, California
May 11, 2000
F-1
<PAGE>
ORANGECO
COMBINED STATEMENTS OF ASSETS, LIABILITIES AND DEFICIT
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
---------------- ----------------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents............................... $ 1,846,000 $ 4,498,000
Property, plant, and equipment
Land............................................... 10,416,000 4,371,000
Building........................................... 28,096,000 14,077,000
Furniture, fixtures, and equipment................. 45,497,000 41,851,000
---------------- ----------------
84,009,000 60,299,000
Accumulated depreciation........................... (11,477,000) (5,633,000)
---------------- ----------------
72,532,000 54,666,000
Real estate construction in process..................... 2,262,000 -
Other assets............................................ 4,037,000 5,689,000
---------------- ----------------
Total assets.............................. $ 80,677,000 $ 64,853,000
================ ================
LIABILITIES AND DEFICIT
-----------------------
Accrued and other liabilities.............................. $ 3,489,000 $ 3,801,000
Advances from Public Storage............................... 103,799,000 117,163,000
Deficit.................................................... (26,611,000) (56,111,000)
---------------- ----------------
Total liabilities and deficit................ $ 80,677,000 $ 64,853,000
================ ================
</TABLE>
See accompanying notes.
F-2
<PAGE>
ORANGECO
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
REVENUES:
<S> <C> <C> <C>
Operating revenues:
Portable self-storage operations.. $ 25,591,000 $ 24,238,000 $ 7,893,000
Truck operations.................. 3,580,000 2,153,000 1,242,000
Interest and other income............. 239,000 141,000 75,000
---------------- ---------------- ----------------
29,410,000 26,532,000 9,210,000
---------------- ---------------- ----------------
EXPENSES:
Cost of operations:
Portable self-storage operations
($1,912,000, $10,546,000, and
$11,225,000 of expenses shared
with Public Storage and affiliates
in 1999, 1998, and 1997,
respectively)................... 28,827,000 47,810,000 31,086,000
Truck operations.................. 3,227,000 2,003,000 1,281,000
Depreciation and amortization.......... 6,193,000 4,645,000 1,715,000
General and administrative ($505,000,
$1,147,000, and $1,089,000 of
expenses shared with Public
Storage and affiliates in 1999,
1998, and 1997, respectively)....... 2,512,000 3,039,000 7,078,000
Interest expense on advances from
Public Storage...................... 5,041,000 4,970,000 1,758,000
---------------- ---------------- ----------------
45,800,000 62,467,000 42,918,000
---------------- ---------------- ----------------
Net loss before loss on disposition of
equipment............................. (16,390,000) (35,935,000) (33,708,000)
Loss on disposition of equipment......... - (640,000) -
---------------- ---------------- ----------------
Net loss................................. $ (16,390,000) $ (36,575,000) $ (33,708,000)
================ ================ ================
</TABLE>
See accompanying notes.
F-3
<PAGE>
ORANGECO
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss........................................... $ (16,390,000) $ (36,575,000) $ (33,708,000)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization expense.......... 6,193,000 4,645,000 1,715,000
Decrease (increase) in other assets............ 1,355,000 455,000 (2,925,000)
Loss on disposition of equipment............... - 640,000 -
Increase (decrease) in accrued and other
liabilities.................................. (312,000) 2,194,000 1,283,000
--------------- --------------- ---------------
Total adjustments......................... 7,236,000 7,934,000 73,000
--------------- --------------- ---------------
Net cash used in operating activities........ (9,154,000) (28,641,000) (33,635,000)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate facilities.............. (19,846,000) - -
Development of real estate facilities.............. (2,262,000) (13,231,000) (5,217,000)
Improvements to real estate facilities............. (218,000) - -
Acquisition of furniture, fixtures, and equipment.. (3,866,000) (14,952,000) (26,864,000)
Proceeds from the sale of furniture, fixtures, and
equipment........................................ 168,000 938,000 -
--------------- --------------- ---------------
Net cash used in investing activities........ (26,024,000) (27,245,000) (32,081,000)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Public Storage....................... - 49,018,000 56,145,000
Capital contributions from affiliates.............. 32,526,000 9,591,000 4,708,000
--------------- --------------- ---------------
Net cash provided by financing activities.... 32,526,000 58,609,000 60,853,000
Net (decrease) increase in cash and cash equivalents.. (2,652,000) 2,723,000 (4,863,000)
Cash and cash equivalents at the beginning of
the period......................................... $ 4,498,000 $ 1,775,000 $ 6,638,000
--------------- --------------- ---------------
Cash and cash equivalents at the end of the period.... $ 1,846,000 $ 4,498,000 $ 1,775,000
=============== =============== ===============
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Borrowings exchanged for equity....................... $ (13,364,000) $ - $ -
Equity exchanged for borrowings....................... 13,364,000 - -
</TABLE>
See accompanying notes.
F-4
<PAGE>
ORANGECO
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Public Storage, Inc. ("PSI") is a real estate investment trust
("REIT") that is principally engaged in the business of owning and
operating miniwarehouse facilities which offer self-storage spaces for
lease, usually on a month-to-month basis, for personal and business use
and, to a lesser extent other activities, including portable
self-storage and sales of locks and boxes and truck rentals. PSI
expects to implement a distribution (the "Distribution") of all of the
shares of PS Orangeco, Inc. to common stockholders of PSI.
At the time of the Distribution, PS Orangeco, Inc. will hold
and operate the following principal business activities: (i)
containerized portable self-storage activities (the "Portable
Self-Storage Operations") and (ii) the leasing of trucks and the
referral of customers to third-party truck vendors in exchange for a
commission (collectively, the "Truck Operations"). PS Orangeco, Inc.
will also sell merchandise at its portable self-storage locations;
sales of merchandise, net of cost of merchandise sold, are presented,
in interest and other income.
Portable Self-Storage Operations began in 1996 and 1997, when
PSI, through affiliates, began operating a containerized portable
self-storage business that rents storage containers to customers for
storage in central facilities. Operations commenced in 1996 facilitated
by the acquisition of an existing operator. At December 31, 1999,
Portable Self-Storage Operations are comprised of 36 facilities in 11
states operating portable-self storage (of which four are operated in
owned facilities), and also includes two recently constructed
industrial facilities that were first leased as of January 1, 2000. One
facility recently acquired is being renovated for use as a portable
self-storage facility.
Truck Operations are conducted at certain of the self-storage
facilities operated by PSI, and are conducted primarily as a complement
to PSI's existing self-storage business.
The financial statements include the historical operations of
the Portable Self-Storage Operations, Truck Operations, and the sale of
merchandise at the portable self-storage locations previously operated
by affiliates of PSI (hereinafter referred to as "Orangeco"). The
accompanying financial statements reflect the historical assets,
liabilities and deficit of the businesses to be included in the
Distribution as of December 31, 1999 and 1998 and the related revenues
and expenses for the years ended December 31, 1999, 1998, and 1997.
Accordingly, these statements do not purport to present the financial
position or results of operations of PSI or any separate legal entity.
The Combined Statements of Operations may not necessarily be indicative
of the revenues and expenses that would have resulted had these
operating segments operated as a stand-alone entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of highly liquid investments
with an original maturity of three months or less at the date of
purchase. The carrying amount of cash and cash equivalents approximates
fair value.
F-5
<PAGE>
ENVIRONMENTAL COSTS:
Orangeco's policy is to accrue environmental assessments
and/or remediation cost when it is probable that such efforts will be
required and the related costs can be reasonably estimated. Orangeco's
current practice is to conduct environmental investigations in
connection with property acquisitions and development activities.
Although there can be no assurance, Orangeco is not aware of any
environmental contamination of any of its facilities which individually
or in the aggregate would be material to its overall business,
financial condition, or results of operations.
PLANT, PROPERTY AND EQUIPMENT:
Cost of land includes appraisal fees and legal fees related to
acquisition and closing costs as well as the cost of acquisition.
Buildings reflect costs incurred to develop or acquire the facilities.
Costs related to the improvements of properties are capitalized and
depreciated over their estimated useful lives. Expenditures for repair
and maintenance are charged to expense when incurred. Buildings are
depreciated on the straight-line method over their estimated useful
lives, which is generally 25 years.
Cost of furniture, fixtures, and equipment include all costs
required to prepare the items for their intended use. Expenditures for
repair and maintenance are charged to expense when incurred. Furniture,
fixtures, and equipment are depreciated on the straight-line method
over the estimated useful lives, which are from 3 - 15 years.
GOODWILL:
Goodwill ($2,971,000 prior to accumulated amortization), which
is included in other assets, consists of the cost over fair value of
net tangible and identifiable assets acquired in connection with the
1996 purchase of an existing operator of a portable self-storage
facility. Goodwill is amortized over a 10-year period. Goodwill at
December 31, 1999 and 1998 is net of accumulated amortization of
$1,015,000 and $718,000, respectively. Included in depreciation and
amortization expense is $297,000 in each of the years ended December
31, 1999, 1998, and 1997 with respect to the amortization of goodwill.
EVALUATION OF ASSET IMPAIRMENT:
In 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" which requires impairment losses to be recorded on
long-lived assets. Management annually evaluates long-lived assets
(including goodwill), by identifying indicators of impairment and by
comparing the sum of the estimated undiscounted future cash flows for
each asset to the asset's carrying amount. When indicators of
impairment are present and the sum of the undiscounted future cash
flows is less than the carrying value of such asset, an impairment loss
is recorded equal to the difference between the asset's current
carrying value and its value based on discounting its estimated future
cash flows. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. Such assets are to be
reported at the lower of their carrying amount or fair value, less cost
to sell. Management's evaluations have indicated no impairment in the
carrying amount of its assets.
REVENUE AND EXPENSE RECOGNITION:
Rents and revenues are recognized as earned. Advertising costs
for 1999, 1998, and 1997, respectively, of $600,000, $9,200,000, and
$10,400,000 are expensed as incurred.
F-6
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expense includes professional fees,
office expense, executive salaries, training, recruiting, and other
such administrative items. General and administrative expense includes
$0.9 million and $0.4 million in 1999 and 1998, respectively, of costs
associated with terminated leases in facilities that were closed.
SHARED EXPENSES:
Cost of operations includes $1,912,000 in 1999, $10,546,000 in
1998 and $11,225,000 in 1997 representing Orangeco's share of
advertising and other such activities that are conducted jointly with
PSI and its affiliates. General and administrative expense includes
$505,000, $1,147,000 and $1,089,000 in 1999, 1998 and 1997,
respectively, of such shared expenses. These aforementioned amounts
included in cost of operations and general and administrative expense
represent all amounts incurred by PSI and its affiliates on behalf of
Orangeco, all of which were allocated to Orangeco in accordance with
the allocation methodology pursuant to the cost allocation and
administrative services agreement between Orangeco and PSI. Allocations
of shared expenses are based upon services provided using a methodology
that Management believes is reasonable. The expenses as presented on
the income statement include all expenses that Orangeco incurs as a
stand-alone business operated as a business unit of Public Storage. If
Orangeco were operated as a separate publicly-held entity, Orangeco
estimates that it would incur an additional $625,000 (unaudited) in
general and administrative expenses each year, comprised primarily of
transfer agent fees, audit fees, tax return preparation, and other
expenses related to shareholder relations.
INCOME TAXES:
Each of the components of Orangeco, as included in the
financial statements herein, have been owned historically by various
entities with different taxable characteristics, including PSI, a REIT,
an operating partnership that owned substantially all of the Portable
Self-Storage Operations, and, to a much lesser extent, a "C"
corporation. Orangeco, once distributed to the shareholders of Public
Storage, will not maintain these tax characteristics and tax bases. The
"C" corporation had a net operating loss carryforward of approximately
$3.8 million at December 31, 1999.
3. PROPERTY, PLANT AND EQUIPMENT
Land and building at December 31, 1999 consists of (i) 5 real
estate facilities owned by Orangeco for use in the Portable
Self-Storage Operations and (ii) two facilities owned by Orangeco that
were leased to third parties effective January 1, 2000.
Orangeco capitalized interest in the amount of $50,000,
$497,000, and $85,000 in 1999, 1998, and 1997, respectively, relating
to the development of several facilities.
Furniture, fixtures, and equipment includes (i) the portable
storage containers and associated container coverings utilized in
Portable Self-Storage operations ($31,852,000 and $31,720,000 at
December 31, 1999 and 1998, respectively), (ii) trucks utilized in
Portable Self-Storage and Truck Operations ($4,343,000 and $3,506,000
at December 31, 1999 and 1998, respectively, (iii) leasehold
improvements ($2,447,000 and $2,372,000 at December 31, 1999 and 1998,
respectively), and (iv) furniture and other equipment ($6,855,000 and
$4,253,000 at December 31, 1999 and 1998, respectively).
F-7
<PAGE>
The activity in plant, property, and equipment in 1999, 1998,
and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
LAND AND BUILDING:
<S> <C> <C> <C>
Balance at beginning of year................... $ 18,448,000 $ - $ -
Property acquisitions.......................... 19,846,000 - -
Developed facilities........................... - 18,448,000 -
Capital improvements........................... 218,000 - -
------------------ ------------------ ------------------
Balance at end of year......................... 38,512,000 18,448,000 -
------------------ ------------------ ------------------
FURNITURE, FIXTURES, AND EQUIPMENT:
Balance at beginning of year................... 41,851,000 28,648,000 1,784,000
Acquisitions................................... 3,866,000 14,951,000 26,864,000
Disposals ..................................... (220,000) (1,748,000) -
------------------ ------------------ ------------------
Balance at end of year......................... 45,497,000 41,851,000 28,648,000
------------------ ------------------ ------------------
ACCUMULATED DEPRECIATION:
Balance at beginning of year................... (5,633,000) (1,456,000) (38,000)
Additions during the year...................... (5,896,000) (4,348,000) (1,418,000)
Disposals...................................... 52,000 171,000 -
------------------ ------------------ ------------------
Balance at end of year......................... (11,477,000) (5,633,000) (1,456,000)
------------------ ------------------ ------------------
Total plant, property and equipment at end of year $ 72,532,000 $ 54,666,000 $ 27,192,000
================== ================== ==================
CONSTRUCTION IN PROGRESS:
Balance at beginning of year................... $ - $ 5,217,000 $ -
Current development............................ 2,262,000 13,231,000 5,217,000
Developed facilities........................... - (18,448,000) -
------------------ ------------------ ------------------
Balance at end of year......................... $ 2,262,000 $ - $ 5,217,000
================== ================== ==================
</TABLE>
4. FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of
financial instruments is described below. Management has estimated the
fair value of its financial instruments using available market
information and appropriate valuation methodologies. Considerable
judgment is required in interpreting market data to develop estimates
of fair value. Accordingly, estimated fair values are not necessarily
indicative of the amounts that could be realized in current market
exchanges.
Due to the short period to maturity of Orangeco's cash and
cash equivalents, accounts receivable, other assets, and accrued and
other liabilities, the carrying values as presented on the combined
balance sheets are reasonable estimates of fair value.
Orangeco's financial assets that are exposed to credit risk
consist primarily of cash and cash equivalents and accounts receivable.
Cash and cash equivalents, which consist of short-term investments,
including commercial paper, are only invested in entities with an
investment grade credit rating.
Orangeco, in the normal course of business, is exposed to
credit risk from its customers. However, customer receivables are
generally not a significant portion of Orangeco's total assets and are
comprised of a large number of individual customers.
F-8
<PAGE>
Orangeco is not exposed to significant interest rate risk due
to the short-term maturity of its monetary current assets and current
liabilities.
5. RELATED PARTY TRANSACTIONS
During 1997, 1998, and 1999, Public Storage provided operating
advances to Orangeco at an average interest rate on amounts outstanding
during each period of 5.5% in 1999, 5.15% in 1998, and 9.5% in 1997. In
1997, an average of approximately $12,000,000, representing a portion
of average advances outstanding, was non interest bearing.
Throughout each of the three years ended December 31, 1999,
there have been significant intercompany arrangements between Public
Storage and Orangeco as Orangeco has operated as a business unit of
Public Storage. Such arrangements include shared yellow page and
television advertising activities, shared personnel, and other shared
resources. Such amounts are separately disclosed on the Statements of
Operations.
6. COMMITMENTS AND CONTINGENCIES
Orangeco has entered into operating leases for 31 of the 36
portable self-storage locations and its trucks and equipment. Minimum
lease payments due under these leases as of December 31, 1999 are as
follows:
Minimum Lease Payments
-------------------------------------------------
Trucks and Equipment Facility Leases
-------------------------------------------------
2000 $ 3,578,000 $ 9,981,000
2001 3,339,000 8,877,000
2002 2,697,000 5,811,000
2003 2,258,000 1,127,000
2004 1,529,000 487,000
Thereafter $ 224,000 $ 164,000
Rent expense was $13.6 million, $19.2 million and $8.8 million
for the years ended December 31, 1999, 1998 and 1997.
Orangeco is involved in various legal proceedings arising in
the normal course of business. In the opinion of management, the
ultimate outcome of these proceedings will not have a material effect
on Orangeco's financial position, results of operations, or its
liquidity.
7. DEFICIT
Deficit represents the excess of liabilities over assets and
reflects the effect of net distributions and capital transactions
between PSI and its affiliates.
8. DISCLOSURES REGARDING SEGMENT REPORTING
In July 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FAS 131"), which establishes
standards for the way that public business enterprises report
information about operating segments. This statement is effective for
F-9
<PAGE>
financial statements for periods beginning after December 15, 1997.
Orangeco has adopted this standard for all years presented.
DESCRIPTION OF EACH REPORTABLE SEGMENT: Orangeco's reportable
segments reflect its significant operating activities that are
evaluated separately by management. There are two reportable segments:
Portable Self-Storage Operations and Truck Operations.
Portable Self-Storage Operations reflect portable self-storage
activities. Truck Operations include the rental of trucks to customers
as well as the referral of truck rentals to third parties, primarily on
miniwarehouses operated by PSI.
MEASUREMENT OF SEGMENT PROFIT OR LOSS: The management of
Orangeco evaluates performance and allocates resources based upon the
net segment income of each segment in conformity with Generally
Accepted Accounting Principles and Orangeco's significant accounting
policies. There are no significant intersegment activities.
MEASUREMENT OF SEGMENT ASSETS: Management considers the level
of net investment required in making resource allocation decisions.
PRESENTATION OF SEGMENT INFORMATION: The following tables
reconcile the performance of each segment, in terms of segment
revenues, segment income, segment assets and additions to long-lived
assets to the combined revenues, net income, assets and additions to
long-lived assets of Orangeco:
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
------- ------- -------
(Dollar amounts in thousands)
RECONCILIATION OF REVENUES BY SEGMENT:
- --------------------------------------
<S> <C> <C> <C>
Portable self-storage operations ........................ $25,591 $24,238 $7,893
Truck operations ........................................ 3,580 2,153 1,242
Interest and other income - not allocated to segments.... 239 141 75
------- ------- -------
Total revenues....................................... $29,410 $26,532 $9,210
======= ======= =======
RECONCILIATION OF NET LOSS BY SEGMENT:
- --------------------------------------
Portable self-storage operations ........................ $(11,910) $(31,865) $(31,963)
Truck operations ........................................ 322 119 (62)
Interest expense - not allocated to segments............ (5,041) (4,970) (1,758)
Interest and other income- not allocated to segments..... 239 141 75
------- ------- -------
Total net loss....................................... $(16,390) $(36,575) $(33,708)
======= ======= =======
RECONCILIATION OF TOTAL ASSETS BY SEGMENT:
- ------------------------------------------
Portable self-storage operations ........................ $78,657 $60,074 $38,648
Truck Operations......................................... 174 281 202
Cash - not allocated to segments......................... 1,846 4,498 1,775
------- ------- -------
Total assets......................................... $80,677 $64,853 $40,625
======= ======= =======
ADDITIONS TO LONG-LIVED ASSETS:
- -------------------------------
Portable self-storage operations ........................ $26,192 $28,182 $31,975
Truck Operations......................................... - - 106
------- ------- -------
Total additions to long-lived assets................. $26,192 $28,182 $32,081
======= ======= =======
</TABLE>
F-10
<PAGE>
9. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments
and Hedging Activities." This Statement is effective for Orangeco's
quarter ended March 31, 2000. SFAS 133 requires that an entity
recognize all derivative instruments as either assets or liabilities
and measure those instruments at fair value. Orangeco has no derivative
instruments and therefore does not believe that this statement will
have any material impact upon its combined financial statements.
10. SUBSEQUENT EVENTS
In March 2000, PSI filed a Form 10 with the Securities and
Exchange Commission describing its intention to distribute all of the
shares of Orangeco to its shareholders. Additional information with
regard to this transaction is included in the Form 10 filed with the
Securities and Exchange Commission.
F-11
<PAGE>
Orangeco
Schedule III - Real Estate and Accumulated Depreciation
At December 31, 1999
<TABLE>
<CAPTION>
Building, Land Date
Improvements & Accumulated Completed/
Description Land Equipment Total Depreciation Acquired
- -------------------------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Renton, Washington $ 725,000 $ 2,196,000 $ 2,921,000 $ (150,000) 6/98
Pompano, Florida 795,000 2,312,000 3,107,000 (139,000) 6/98
St. Petersburg, Florida 932,000 2,705,000 3,637,000 (73,000) 8/98
West Palm Beach, Florida 917,000 2,422,000 3,339,000 (73,000) 9/98
Miami, Florida 1,102,000 2,494,000 3,596,000 (125,000) 10/98
Northridge, California - 2,066,000 2,066,000 (90,000) 11/98
Burlingame, California 4,043,000 9,434,000 13,477,000 (24,000) 12/99
Denver, Colorado 1,902,000 4,467,000 6,369,000 (10,000) 12/99
--------------- --------------- --------------- ---------------
$ 10,416,000 $ 28,096,000 $ 38,512,000 $ (684,000)
=============== =============== =============== ===============
</TABLE>
F-12
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Public Storage expects to make a distribution of 90.5% of the shares of
Orangeco to Public Storage's common shareholders. At the time of the
distribution, Orangeco will principally operate portable self-storage and truck
rental activities.
In the distribution, each common shareholder of Public Storage will
receive one share of Orangeco for each 20 shares of Public Storage common stock
held; each class B common shareholder of Public Storage will receive 0.97 shares
of Orangeco for each 20 shares of Public Storage class B stock held. Public
Storage will retain a 9.5% interest in Orangeco.
In connection with, and conditioned upon, the distribution, Public
Storage and Orangeco will enter into various intercompany operating agreements
relating principally to the leasing of facilities, joint marketing efforts, and
truck rentals and retail sales activities. See "Arrangements Between Orangeco
and Public Storage."
Prior to the distribution, Public Storage will contribute $30,000,000
of cash to Orangeco to be used to fund its operating activities. In addition,
Public Storage will convert its advances to equity in Orangeco.
The following unaudited pro forma combined financial statements were
prepared to reflect the impact of the transactions occurring in connection with
the distribution and estimated additional expenses that will be incurred by
Orangeco as a separate publicly-held corporation.
The pro forma combined balance sheet at December 31, 1999 has been
prepared to reflect (i) Public Storage's contribution of $30,000,000 in cash
(ii) conversion of Public Storage advances to equity of Orangeco and (iii) the
capitalization expected at the time of the distribution.
The pro forma combined statement of operations for the year ended
December 31, 1999 has been prepared assuming (i) additional costs associated
with Orangeco's operation as a stand-alone entity following the distribution
(ii) the elimination of interest expense on advances from Public Storage that
will be converted to equity and (iii) the impact on facility lease expense, as
follows. In connection with the distribution, Public Storage agrees to net lease
to Orangeco, for use in its portable self-storage business, a part of the
facilities that combines portable self-storage and mini-warehouse space. Many of
these facilities represent replacement properties that Orangeco occupied
throughout fiscal 1999 and were leased from third parties. Upon completion of a
facility that replaces an existing facility, Public Storage agrees to assume
Orangeco's lease for the replaced facility.
The pro forma adjustments are based upon available information and upon
certain assumptions as set forth in the pro forma combined financial statements
that Orangeco believes are reasonable in the circumstances. The pro forma
combined financial statements and accompanying notes should be read in
conjunction with the historical financial statements of Orangeco. The following
pro forma combined financial statements do not purport to represent what
Orangeco's results operations would actually have been if the transactions in
fact had occurred at the beginning of the respective periods or to project
Orangeco's results of operations for any future date or period.
F-13
<PAGE>
ORANGECO
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ORANGECO ADJUSTMENTS ORANGECO
(HISTORICAL) (NOTE 1) (PRO FORMA)
---------------- ---------------- ----------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 1,846,000 $ 30,000,000 $ 31,846,000
Property, plant and equipment, net of accumulated
depreciation........................................... 72,532,000 - 72,532,000
Real estate construction in progress...................... 2,262,000 - 2,262,000
Receivables and other assets.............................. 4,037,000 - 4,037,000
---------------- ---------------- ----------------
Total assets......................................... $ 80,677,000 $ 30,000,000 $ 110,677,000
================ ================ ================
LIABILITIES AND EQUITY (DEFICIT)
Accrued and other liabilities............................. $ 3,489,000 $ - $ 3,489,000
Advances from Public Storage.............................. 103,799,000 (103,799,000) -
Shareholders' equity (deficit):
Common stock, $0.10 par value, 200,000,000 shares
authorized, 7,374,972 pro forma shares issued and
outstanding at December 31, 1999.................... - 737,000 737,000
Paid-in capital........................................ - 106,451,000 106,451,000
Equity (deficit)....................................... (26,611,000) 26,611,000 -
---------------- ---------------- ----------------
Total shareholders' equity (deficit)............... (26,611,000) 30,000,000 107,188,000
---------------- ---------------- ----------------
Total liabilities and shareholders' equity (deficit)... $ 80,677,000 $ 30,000,000 $ 110,677,000
================ ================ ================
Book value per common share (Note 2)...................... $ 14.53
================
Shares outstanding (Note 2)............................... 7,374,972
================
</TABLE>
See Accompanying Notes to Pro Forma Combined Balance Sheet.
F-14
<PAGE>
ORANGECO
NOTES TO PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1999
(UNAUDITED)
1. CAPITAL TRANSACTIONS AND DISTRIBUTION
-------------------------------------
The following pro forma adjustments have been made to reflect (i)
Public Storage's equity contribution of $30,000,000 cash to Orangeco,
(ii) the conversion of Public Storage's advances into equity of
Orangeco and (iii) the distribution of common shares of Orangeco to the
shareholders of Public Storage:
<TABLE>
<CAPTION>
<S> <C>
* Cash and equity has been increased to reflect Public Storage's
contribution of $30,000,000 cash to Orangeco.............................. $ 30,000,000
===================
* Borrowings from Public Storage has been decreased, and equity
increased, to reflect Public Storage's conversion of its
receivable from Orangeco to equity in Orangeco........................... $ 103,799,000
===================
* Common stock, equity, and paid in capital have been adjusted
to reflect the ending capitalization of Orangeco of
7,374,972 shares (based upon 126,697,000 common shares of
Public Storage outstanding at December 31, 1999 at the
Distribution Ratio of 1:20, and 7,000,000 class B common
shares of Public Storage outstanding at December 31,
1999 at a distribution ratio of 0.97:20, a total of 6,674,350
shares, then divided by 90.5% to reflect a 9.5% interest
retained by Public Storage), as follows:
* Common stock has been increased to reflect 7,374,972
shares issued at $0.10 par value..................................... $ 737,000
===================
* Paid in capital has been increased to reflect
$107,188,000 total equity ($26,611,000 historical
deficit adjusted for $30,000,000 cash contribution
from Public Storage and $103,799,000 exchange of
receivable for equity) less $737,000 allocated to common
stock................................................................ $ 106,451,000
===================
* Equity has been reduced to reflect the allocation of
$107,188,000 total equity........................................... $ (107,188,000)
===================
</TABLE>
2. COMMON SHARES OUTSTANDING AND BOOK VALUE PER COMMON SHARE
---------------------------------------------------------
Book value per common share has been determined by dividing
total common shareholders' equity by the number of shares to be
distributed to the shareholders of Public Storage. The following
summarizes the common shares outstanding:
F-15
<PAGE>
<TABLE>
<CAPTION>
Common shares
outstanding
-------------
<S> <C>
* Total shares of Orangeco to be distributed to common shareholders
of Public Storage, based upon 126,697,000 shares outstanding at
December 31, 1999 multiplied by distribution ratio of 1:20................... 6,334,850
* Total shares of Orangeco to be distributed to Class B common
shareholders of Public Storage, based upon 7,000,000 Class B
shares outstanding at December 31, 1999 multiplied by
distribution ratio of 0.97:20................................................ 339,500
* Total shares of Orangeco to be retained by Public Storage, based
upon 6,674,350 total shares to be distributed to shareholders of
Public Storage divided by 90.5% (100% less 9.5% to be retained by
Public Storage), then multiplied by 9.5%..................................... 700,622
-------------
Total pro forma common shares of Orangeco outstanding at December 31, 1999...... 7,374,972
=============
</TABLE>
F-16
<PAGE>
ORANGECO
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Orangeco Adjustments Orangeco
(Historical) (Note 1) (Pro forma)
------------------ ------------------ ------------------
REVENUES:
<S> <C> <C> <C>
Revenues - Portable self-storage.............. $ 25,591,000 $ - $ 25,591,000
Revenues - Truck operations................... 3,580,000 - 3,580,000
Interest and other income..................... 239,000 - 239,000
------------------ ------------------ ------------------
29,410,000 - 29,410,000
------------------ ------------------ ------------------
EXPENSES:
Cost of operations - Portable self-storage ... 28,827,000 (3,400,000) 25,427,000
Cost of operations - Truck operations......... 3,227,000 - 3,227,000
Depreciation and amortization................. 6,193,000 - 6,193,000
General and administrative.................... 2,512,000 625,000 3,137,000
Interest Expense.............................. 5,041,000 (5,041,000) -
------------------ ------------------ ------------------
45,800,000 (7,816,000) 37,984,000
------------------ ------------------ ------------------
Net loss......................................... $ (16,390,000) $ 7,816,000 $ (8,574,000)
================== ================== ==================
Net loss per common share
Basic....................................... $ (2.22) $ (1.16)
================== ==================
Diluted..................................... $ (2.22) $ (1.16)
================== ==================
Weighted average common shares (Note 2)
Basic....................................... 7,374,972 7,374,972
================== ==================
Diluted..................................... 7,374,972 7,374,972
================== ==================
</TABLE>
See Accompanying Notes to Pro Forma Combined Statements of Operations.
F-17
<PAGE>
ORANGECO
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
1. IMPACT OF DISTRIBUTION AND ASSOCIATED TRANSACTIONS
--------------------------------------------------
As a result of the distribution, Orangeco will become a
separate, publicly held entity. Accordingly, Orangeco will begin
incurring all the costs incurred as a publicly held entity that it
previously did not incur as a non-public entity. These costs include
transfer agent fees, audit fees, legal fees, director's fees, office
salaries, and other such expenses.
In connection with the distribution, Public Storage and
Orangeco have entered into lease arrangements whereby Public Storage
agrees to net lease to Orangeco, for use in its portable self-storage
business, part of facilities that combine traditional self-storage and
containerized self-storage space on the same location. Many of the
facilities that Public Storage will lease to Orangeco are currently
being developed and are expected to be available for occupancy over the
next twelve months. In many instances, it is anticipated that Orangeco
will vacate facilities that are leased from third parties prior to the
expiration of the lease term and occupy these newly developed Public
Storage facilities. In such instances, Public Storage will assume the
lease obligation to the third parties. Once Public Storage assumes
these leases, Orangeco will no longer have any obligations, contingent
or otherwise, with respect to these leases.
The following pro forma adjustments have been recorded to
reflect the impact of the distribution on Orangeco's general and
administrative expense, as well as the impact of the leasing
arrangements with Public Storage and the conversion of advances from
Public Storage to equity of Orangeco.
<TABLE>
<CAPTION>
Year ended
December 31, 1999
-----------------
<S> <C>
* An adjustment to cost of operations has been recorded to reflect
the assumed lease of 27 facilities from Public Storage as of
January 1, 1999. For these 27 facilities, lease and utilities
expense will be approximately $4,700,000, compared to
approximately $8,100,000 in lease and utilities expense for these
27 facilities included in the 1999 historical amounts. The
adjustment reflects a 26% reduction in leased space, combined with
lower lease rates due to longer lease terms and changes in the
nature of the leased space.......................................... $ (3,400,000)
=================
* General and administrative expense has been increased to reflect
the costs of Orangeco's operating as a separate publicly held
entity including transfer agent fees, audit fees, tax return
preparation fees, director's fees, officer salaries, and other
expenses............................................................ $ 625,000
=================
* Interest expense has been reduced to reflect the conversion of
Public Storage's advances into equity .............................. $ (5,041,000)
=================
</TABLE>
F-18
<PAGE>
2. WEIGHTED AVERAGE SHARES OUTSTANDING
-----------------------------------
Pro forma net loss per common share has been determined by
dividing total pro forma net loss by the number of shares to be
distributed to the shareholders of Public Storage. The number of common
shares of Orangeco to be distributed to the shareholders of Public
Storage is determined as follows:
<TABLE>
<CAPTION>
Common shares
outstanding
--------------
<S> <C>
* Total shares of Orangeco to be distributed to common shareholders of
Public Storage, based upon 126,697,000 common shares outstanding at
December 31, 1999 multiplied by distribution ratio of 1:20................ 6,334,850
* Total shares of Orangeco to be distributed to class B common shareholders
of Public Storage, based upon 7,000,000 class B shares outstanding at
December 31, 1999 multiplied by distribution ratio of 0.97:20.............
339,500
* Total shares of Orangeco to be retained by Public Storage, based upon
6,674,350 total shares to be distributed to shareholders of Public
Storage divided by 90.5% (100% less 9.5% to be retained by Public
Storage), then multiplied by 9.5%......................................... 700,622
--------------
Total pro forma common shares of Orangeco....................... 7,374,972
==============
</TABLE>
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
PS Orangeco, Inc.
By: /s/ HARVEY LENKIN
------------------------------
Name: Harvey Lenkin
Title: Vice President
Date: May 12, 2000
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2 Form of Distribution Agreement.(1)
3.1 Form of Restated Articles of Incorporation of
Registrant.(1)
3.2 Form of Restated Bylaws of Registrant.(1)
10.1 Registrant's 2000 Stock Option and Incentive
Plan.(1)
10.2 Agreement to Lease and to Complete Properties
for Lease.(1)
10.3 Intercompany Operating Agreement.(1)
10.4 Cost Sharing and Administrative Services
Agreement dated as of November 16, 1995 by and
among PSCC, Inc. and the owners listed
therein.(2)
10.5 Form of Indemnity Agreement.(1)
27 Financial Data Schedule.(3)
---------------
(1) To be filed by amendment.
(2) Filed as exhibit 10.2 to the form 10-Q for the quarterly period
ended March 31, 1998 of PS Business Parks, Inc. (File No.
1-10709) and incorporated herein by reference.
(3) Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001108762
<NAME> ORANGECO
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,846,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,846,000
<PP&E> 84,009,000
<DEPRECIATION> (11,477,000)
<TOTAL-ASSETS> 80,677,000
<CURRENT-LIABILITIES> 3,489,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (26,611,000)
<TOTAL-LIABILITY-AND-EQUITY> 80,677,000
<SALES> 0
<TOTAL-REVENUES> 29,410,000
<CGS> 0
<TOTAL-COSTS> 32,054,000
<OTHER-EXPENSES> 8,705,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,041,000
<INCOME-PRETAX> (16,390,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,390,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,390,000)
<EPS-BASIC> (2.22)
<EPS-DILUTED> (2.22)
</TABLE>
