SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
---------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission File Number: 1-8389
------
PUBLIC STORAGE, INC.
--------------------
(Exact name of registrant as specified in its charter)
California 95-3551121
- ----------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2394
- ----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 1, 2000:
Common Stock, $.10 Par Value - 125,293,791 shares
- -------------------------------------------------
Class B Common Stock, $.10 Par Value - 7,000,000 shares
- -------------------------------------------------------
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
- ----------------------------------- -------------------------------------------
A, $.01 Par Value - 4,353,102 depositary shares (representing 4,353.102 shares
- --------------------------------------------------------------------------------
of Equity Stock, Series A)
- --------------------------
Equity Stock, Series AA, $.01 Par Value - 225,000 shares
- --------------------------------------------------------
Equity Stock, Series AAA, $.01 Par Value - 4,289,544 shares
- -----------------------------------------------------------
<PAGE>
PUBLIC STORAGE, INC.
INDEX
Pages
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999 2
Condensed Consolidated Statements of Shareholders' Equity
for the Three Months Ended March 31, 2000 3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and 1999 4 - 5
Notes to Condensed Consolidated Financial Statements 6 - 18
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 19 - 28
PART II. OTHER INFORMATION (Items 1, 2, 3, 4 and 5 are not applicable)
-----------------
Item 6. Exhibits and Reports on Form 8-K 29 - 34
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------------- ---------------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents...................................................... $ 274,681 $ 55,125
Real estate facilities, at cost:
Land........................................................................ 1,038,575 1,036,958
Buildings................................................................... 2,817,775 2,785,475
--------------- ---------------
3,856,350 3,822,433
Accumulated depreciation.................................................... (565,714) (533,412)
--------------- ---------------
3,290,636 3,289,021
Construction in process..................................................... 150,706 140,764
--------------- ---------------
3,441,342 3,429,785
Investment in real estate entities............................................. 475,642 457,529
Intangible assets, net......................................................... 191,998 194,326
Mortgage notes receivable from affiliates...................................... 33,185 18,798
Other assets................................................................... 75,500 58,822
--------------- ---------------
Total assets..................................................... $ 4,492,348 $ 4,214,385
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Notes payable.................................................................. $ 166,741 $ 167,338
Distributions payable.......................................................... - 82,086
Accrued and other liabilities.................................................. 84,135 89,261
--------------- ---------------
Total liabilities..................................................... 250,876 338,685
Minority interest.............................................................. 484,339 186,600
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 11,141,100
shares issued and outstanding (11,141,100 issued and outstanding at
December 31, 1999), at liquidation preference:
Cumulative Preferred Stock, issued in series.......................... 1,155,150 1,155,150
Common Stock, $0.10 par value, 200,000,000 shares authorized, 125,422,557
shares issued and outstanding (126,697,023 at December 31, 1999).......... 12,543 12,671
Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
4,300.555 shares issued and outstanding (none issued and outstanding at
December 31, 1999)........................................................ - -
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized and
issued.................................................................... 700 700
Paid-in capital............................................................. 2,515,173 2,463,193
Cumulative net income....................................................... 1,162,534 1,089,973
Cumulative distributions paid............................................... (1,088,967) (1,032,587)
--------------- ---------------
Total shareholders' equity............................................ 3,757,133 3,689,100
--------------- ---------------
Total liabilities and shareholders' equity....................... $ 4,492,348 $ 4,214,385
=============== ===============
</TABLE>
See accompanying notes.
1
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------
2000 1999
--------------- ---------------
REVENUES:
Rental income:
<S> <C> <C>
Self-storage facilities................................... $ 154,634 $ 129,029
Commercial properties..................................... 2,759 1,914
Portable self-storage..................................... 7,549 5,428
Equity earnings of real estate entities....................... 8,276 8,122
Interest and other income..................................... 3,377 3,522
--------------- ---------------
176,595 148,015
EXPENSES:
Cost of operations:
Self-storage facilities................................... 50,357 40,629
Commercial properties..................................... 949 638
Portable self-storage..................................... 7,854 7,831
Depreciation and amortization................................. 36,034 30,156
General and administrative.................................... 3,045 2,362
Interest expense.............................................. 1,406 1,204
--------------- ---------------
99,645 82,820
--------------- ---------------
Income before minority interest............................... 76,950 65,195
Minority interest in income................................... (4,389) (3,353)
--------------- ---------------
NET INCOME......................................................... $ 72,561 $ 61,842
=============== ===============
NET INCOME ALLOCATION:
Allocable to preferred shareholders........................... $ 25,038 $ 21,530
Allocable to equity shareholders, Series A.................... 2,258 -
--------------- ---------------
Allocable to common shareholders.............................. 45,265 40,312
=============== ===============
$ 72,561 $ 61,842
=============== ===============
PER COMMON SHARE:
Net income per common share - Basic........................... $ 0.34 $ 0.34
=============== ===============
Net income per common share - Diluted......................... $ 0.34 $ 0.34
=============== ===============
Net income per depositary share of Equity Stock, Series A -
Basic and Diluted......................................... $ 0.61 $ -
=============== ===============
Weighted average common shares - Basic........................ 132,781 118,624
=============== ===============
Weighted average common shares - Diluted...................... 132,902 119,014
=============== ===============
Weighted average depositary shares of Equity Stock, Series A -
Basic and Diluted......................................... 3,702 -
=============== ===============
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Senior Class B
Preferred Common Common Paid-in
Stock Stock Stock Capital
---------- -------- ------- -----------
<S> <C> <C> <C> <C>
Balances at December 31, 1999.......................... $1,155,150 $12,671 $700 $2,463,193
Issuance of common stock:
Exercise of stock options (105,834 shares).......... - 10 - 1,969
Repurchase of common stock (1,380,300 shares) ......... - (138) - (30,599)
Issuance of Equity Stock, Series A (4,300.555 shares).. - - - 83,810
Costs in connection with capital raising activities.... - - - (3,200)
Net income............................................. - - - -
Cash distributions:
Cumulative Senior Preferred Stock................... - - - -
Equity Stock, Series A.............................. - - - -
Class B Common Stock................................ - - - -
Common Stock........................................ - - - -
---------- -------- ------- -----------
Balances at March 31, 2000............................. $1,155,150 $12,543 $700 $2,515,173
========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
---------- ------------- -------------
<S> <C> <C> <C>
Balances at December 31, 1999.......................... $1,089,973 $(1,032,587) $3,689,100
Issuance of common stock:
Exercise of stock options (105,834 shares).......... - - 1,979
Repurchase of common stock (1,380,300 shares) ......... - - (30,737)
Issuance of Equity Stock, Series A (4,300.555 shares).. - - 83,810
Costs in connection with capital raising activities.... - - (3,200)
Net income............................................. 72,561 - 72,561
Cash distributions:
Cumulative Senior Preferred Stock................... - (25,038) (25,038)
Equity Stock, Series A.............................. - (2,258) (2,258)
Class B common stock................................ - (1,494) (1,494)
Common Stock........................................ - (27,590) (27,590)
---------- ------------- -------------
Balances at March 31, 2000............................. $1,162,534 $(1,088,967) $3,757,133
========== ============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income...................................................... $ 72,561 $ 61,842
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 36,034 30,156
Depreciation included in equity earnings of real estate
entities.................................................... 5,032 4,129
Minority interest in income................................... 4,389 3,353
-------------- --------------
Total adjustments......................................... 45,455 37,638
-------------- --------------
Net cash provided by operating activities............. 118,016 99,480
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on notes receivable from
affiliates.................................................. 353 13,864
Notes receivable from affiliates.............................. (11,400) (41,200)
Capital improvements to real estate facilities................ (4,126) (2,935)
Construction in process....................................... (44,318) (31,309)
Acquisition of minority interests in consolidated real estate
partnerships................................................ (26,613) (3,069)
Acquisition of investment in real estate entities............. (37,538) (22,802)
Acquisition of real estate facilities......................... - (5,255)
Acquisition cost of business combinations..................... - (103,646)
Proceeds from the sale of real estate facilities.............. 8,638 -
-------------- --------------
Net cash used in investing activities................. (115,004) (196,352)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable........................... (597) (581)
Net proceeds from the issuance of common stock................ 1,979 313
Net proceeds from the issuance of preferred stock............. - 222,555
Net proceeds from the issuance of equity stock................ 39,800 -
Net proceeds from the issuance of preferred partnership units. 311,800 -
Repurchase of common stock.................................... (30,737) (17,578)
Distributions paid to preferred and common shareholders....... (56,380) (49,309)
Special distribution paid to common shareholders.............. (38,076) -
Distributions from operations to minority interests........... (6,178) (5,664)
Distributions to minority interests in excess of operating
activities.................................................. (1,268) (5,003)
Other......................................................... (3,799) 3,489
-------------- --------------
Net cash provided by financing activities............ 216,544 148,222
-------------- --------------
Net increase in cash and cash equivalents.......................... 219,556 51,350
Cash and cash equivalents at the beginning of the period........... 55,125 51,225
-------------- --------------
Cash and cash equivalents at the end of the period................. $ 274,681 $ 102,575
============== ==============
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------
2000 1999
--------------- ---------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Business combinations:
<S> <C> <C>
Real estate facilities...................................... $ - $ (596,266)
Construction in process..................................... - (11,449)
Investment in real estate entities.......................... - (356)
Mortgage notes receivable................................... - (6,739)
Other assets................................................ - (1,933)
Accrued and other liabilities............................... - 15,651
Minority interest........................................... - 27,009
Notes payable............................................... - 100,000
Reduction to investment in real estate entities in connection with:
Business combinations....................................... - 23,214
Sale of investments......................................... 14,393 -
Increase in other assets in connection with sale of investments. (14,393) -
Acquisition of minority interest and real estate in exchange for
mortgage notes receivable:
Real estate facilities...................................... (14,421)
Minority interest........................................... (12,542)
Mortgage notes receivable forgiven in exchange for minority
interest and real estate...................................... 350
Disposition of real estate facilities in exchange for note
receivable and acquisition of minority interest:
Real estate facilities...................................... 19,006 -
Accumulated depreciation.................................... (251)
Acquisition of minority interest in exchange for the
disposition of real estate facilities......................... (6,427) -
Note receivable received in exchange for the disposition of
real estate facilities........................................ (3,690) -
Decrease in distributions payable through the issuance of Equity
Stock, Series A............................................... (44,010) -
Issuance of common stock in connection with a business
combination................................................... - 347,223
Issuance of Equity Stock, Series A in connection with special
distributions to common shareholders.......................... 44,010 -
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. Description of the business
---------------------------
Public Storage, Inc. (the "Company") is a California corporation,
which was organized in 1980. We are a fully integrated, self-administered
and self-managed real estate investment trust ("REIT") whose principal
business activities include the acquisition, development, ownership and
operation of storage facilities which offer storage spaces and containers
for lease, usually on a month-to-month basis, for personal and business
use. In addition, to a much lesser extent, we have interests in commercial
properties.
In 1996 and 1997, we organized Public Storage Pickup and Delivery,
Inc., as a separate corporation and partnership (the corporation and
partnership are collectively referred to as "PSPUD") to operate storage
facilities that rent portable storage containers to customers for storage
in central warehouses. At March 31, 2000, PSPUD had 36 facilities in
operation.
We invest in real estate facilities by acquiring wholly owned
facilities or by acquiring interests in real estate entities which also own
real estate facilities. At March 31, 2000, we had direct and indirect
equity interests in 1,446 properties located in 38 states, including 1,316
storage facilities and 130 commercial properties. The Company under the
"Public Storage" name operates all of the self-storage facilities.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company and 34 controlled entities (the "Consolidated Entities").
Collectively, the Company and these entities own a total of 1,209 real
estate facilities, consisting of 1,205 storage facilities and four
commercial properties.
At March 31, 2000, we had equity investments in 11 limited
partnerships in which we do not have a controlling interest. These limited
partnerships collectively own 111 self-storage facilities, which are
managed by the Company. In addition, we own approximately 41% of the common
interest in PS Business Parks, Inc. ("PSB"), which owns and operates 126
commercial properties. We do not control these entities, accordingly, our
investments in these limited partnerships and PSB are accounted for using
the equity method.
Use of estimates
----------------
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles 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.
Income tax
----------
For all taxable years subsequent to 1980, the Company qualified
and intends to continue to qualify as a REIT, as defined in Section 856 of
the Internal Revenue Code. As a REIT, we are not taxed on that portion of
our taxable income, which is distributed to our shareholders, provided that
we meet certain tests. We believe we will meet these tests during 2000 and,
accordingly, no provision for income taxes has been made in the
accompanying financial statements.
6
<PAGE>
Financial instruments
---------------------
The methods and assumptions used to estimate the fair value of
financial instruments is described below. We have estimated the fair value
of our financial instruments using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop estimates of market value. Accordingly,
estimated fair values are not necessarily indicative of the amounts that
could be realized in current market exchanges.
For purposes of financial statement presentation, we consider all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Due to the short period to maturity of our cash and cash
equivalents, accounts receivable, other assets, and accrued and other
liabilities, the carrying values as presented on the consolidated balance
sheets are reasonable estimates of fair value.
Financial assets that are exposed to credit risk consist primarily
of cash and cash equivalents, accounts receivable, and notes receivable.
Cash and cash equivalents, which consist of short-term investments,
including commercial paper, are only invested in entities with an
investment grade rating. Notes receivable are substantially all secured by
real estate facilities that we believe are valued in excess of the related
note receivable. Accounts receivable are not a significant portion of total
assets and are comprised of a large number of individual customers.
Real estate facilities
----------------------
Real estate facilities are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the buildings and improvements, which are generally between 5 and 25 years.
Evaluation of asset impairment
------------------------------
In 1995, the Financial Accounting Standards Board issued Statement
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. We annually evaluate 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 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
upon discounting its estimated future cash flows. Statement No. 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. Our evaluations have indicated no
impairment in the carrying amount of our assets.
7
<PAGE>
Other assets
------------
Other assets primarily consist of furniture, fixtures, equipment,
and other such assets associated with the portable self-storage business as
well as accounts receivable, prepaid expenses, and other such assets of the
Company. Included in other assets with respect to the portable self-storage
business is furniture, fixtures, and equipment (net of accumulated
depreciation) of $33,742,000 and $34,704,000 at March 31, 2000 and December
31, 1999, respectively. Included in depreciation and amortization expense
for the three months ended March 31, 2000 and 1999 is $1,153,000 and
$1,182,000, respectively, of depreciation of furniture, fixtures, and
equipment of the portable self-storage business.
Intangible assets
-----------------
Intangible assets consist of property management contracts
($165,000,000) and the cost over the fair value of net tangible and
identifiable intangible assets ($67,726,000) acquired. Intangible assets
are amortized straight-line over 25 years. At March 31, 2000 intangible
assets are net of accumulated amortization of $40,728,000 ($38,400,000 at
December 31, 1999). Included in depreciation and amortization expense for
the three months ended March 31, 2000 and 1999 is $2,328,000, respectively,
related to the amortization of intangible assets.
Revenue and expense recognition
-------------------------------
Property rents are recognized as earned. Equity in earnings of
real estate entities is recognized based on our ownership interest in the
earnings of each of the unconsolidated real estate entities. Advertising
costs are expensed as incurred.
Environmental costs
-------------------
Our 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. Our current practice is to
conduct environmental investigations in connection with property
acquisitions. As a result of environmental investigations of our
properties, which commenced in 1995, we recorded an amount, which, in our
best estimate, will be sufficient to satisfy anticipated costs of known
investigation and remediation requirements. Although there can be no
assurance, we are not aware of any environmental contamination of any of
our facilities which individually or in the aggregate would be material to
our overall business, financial condition, or results of operations.
Net income per common share
---------------------------
Dividends paid to our preferred shareholders totaling $25,038,000
and $21,530,000 for the three months ended March 31, 2000 and 1999,
respectively, have been deducted from net income to arrive at net income
allocable to our common shareholders.
Net income allocated to our common shareholders has been further
allocated among our two classes of common stock; our regular common stock
and our Equity Stock, Series A. The allocation among each class was based
upon the two-class method. Under the two-class method, earnings per share
for each class of common stock is determined according to dividends
declared (or accumulated) and participation rights in undistributed
earnings. Under the two-class method, the Equity Stock, Series A was
allocated approximately $2,258,000 of net income and the remaining
$45,265,000 was allocated to the regular common shares.
8
<PAGE>
Diluted net income per common share is computed using the weighted
average common shares outstanding (adjusted for stock options). Commencing
January 1, 2000, the Company's 7,000,000 Class B common shares outstanding
began to participate in distributions of the Company's earnings.
Distributions per share of Class B common stock are equal to 97% of the per
share distribution paid to the Company's regular common shares. As a result
of this participation in distribution of earnings, for purposes of
computing net income per common share, the Company began to include
6,790,000 (7,000,000 x 97%) Class B common shares in the weighted average
common equivalent shares for the three months ended March 31, 2000.
Weighted average shares for the three months ended March 31, 1999 does not
include any shares with respect to the Class B common stock as these shares
were not participating in distributions of the Company's earnings prior to
January 1, 2000.
Stock-based compensation
------------------------
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123 "Accounting for Stock-Based Compensation" which provides
companies an alternative to accounting for stock-based compensation as
prescribed under APB Opinion No. 25 (APB 25). Statement 123 encourages, but
does not require companies to recognize expense for stock-based awards
based on their fair value at date of grant. Statement No. 123 allows
companies to continue to follow existing accounting rules (intrinsic value
method under APB 25) provided that pro-forma disclosures are made of what
net income and earnings per share would have been had the new fair value
method been used. We have elected to adopt the disclosure requirements of
Statement No. 123 but will continue to account for stock-based compensation
under APB 25.
Reclassifications
-----------------
Certain reclassifications have been made to the consolidated financial
statements for 1999 in order to conform to the 2000 presentation.
3. Merger with Storage Trust Realty, Inc.
--------------------------------------
On March 12, 1999, we completed a merger with Storage Trust
Realty, Inc. ("Storage Trust"). All the outstanding stock of Storage Trust
was exchanged for 13,009,485 shares of the Company's common stock and an
additional 1,011,963 shares were reserved for issuance upon conversion of
limited partnership units in Storage Trust's operating partnership. In this
merger, the Company acquired interests in 215 storage facilities located in
16 states totaling approximately 12 million net rentable square feet.
The historical operating results of the merger with Storage Trust
prior to March 12, 1999 have not been included in our historical operating
results. Pro forma selected financial data for the three months ended March
31, 1999 as though the merger had been effective at January 1, 1999 are as
follows:
Three Months Ended
(In thousands, except per share data) March 31, 1999
- ----------------------------------------------- ------------------
Revenues.................................... $ 165,414
Net income.................................. $ 65,771
Net income per common share (Basic)......... $ 0.34
Net income per common share (Diluted)....... $ 0.34
9
<PAGE>
The pro forma data does not purport to be indicative of operations
that would have occurred had the merger occurred at the beginning of the
period or future results of operations of the Company. Certain pro forma
adjustments were made to the combined historical amounts to reflect (i)
expected reductions in general and administrative expenses, (ii) estimated
increased interest costs to finance the cash portion of the acquisition
cost, and (iii) estimated increased depreciation expense.
4. Real estate facilities
----------------------
Activity in real estate facilities during 2000 is as follows:
In thousands
------------
Operating facilities, at cost
Balance at December 31, 1999 ........................... $ 3,822,433
Developed facilities ................................... 34,376
Disposition of facilities .............................. (19,006)
Acquisition of minority interest ....................... 14,421
Capital improvements ................................... 4,126
------------
Balance at March 31, 2000 .............................. 3,856,350
------------
Accumulated depreciation:
Balance at December 31, 1999 ........................... (533,412)
Additions during the year .............................. (32,553)
Disposition of facilities .............................. 251
------------
Balance at March 31, 2000 .............................. (565,714)
------------
Construction in progress:
Balance at December 31, 1999 ........................... 140,764
Current development .................................... 44,318
Developed facilities ................................... (34,376)
------------
Balance at March 31, 2000 .............................. 150,706
------------
Total real estate facilities ........................... $ 3,441,342
============
During the three months ended March 31, 2000, we opened seven
newly developed facilities having approximately 562,000 aggregate net
rentable square feet. Construction in progress at March 31, 2000 consists
of 40 storage facilities, and eight expansions of existing storage
facilities.
Our policy is to capitalize interest incurred on debt during the
course of construction of our self-storage and industrial facilities.
Interest capitalized during the three months ended March 31, 2000 was
$2,111,000 compared to $958,000 for the same period in 1999.
10
<PAGE>
5. Investment in real estate entities:
-----------------------------------
At March 31, 2000, our investment in real estate entities consists
of (i) partnership interests in approximately 11 partnerships, which
principally own self-storage facilities and (ii) our ownership interest in
PSB. Such interests are non-controlling interests of less than 50% and are
accounted for using the equity method of accounting. Accordingly, earnings
are recognized based upon our ownership interest in each of the
partnerships. During the three months ended March 31, 2000 and 1999, we
recognized earnings from our investments of $8,276,000 and $8,122,000,
respectively.
In April 1997, we formed a joint venture partnership with an
institutional investor (the "Joint Venture") to participate in the
development of approximately $220 million of storage facilities. The Joint
Venture has a total of 44 opened facilities with a total cost of $211.8
million at March 31, 2000, and has three projects in process with an
aggregate cost incurred to date of approximately $15.3 million ($2.8
million estimated to complete) at March 31, 2000.
Summarized combined financial data (based on historical cost) with
respect to those unconsolidated real estate entities in which the Company
had an ownership interest at March 31, 2000 are as follows:
<TABLE>
<CAPTION>
For the three months ended March 31, 2000
----------------------------------------------------------------------
Other Development
Equity Investments Joint Venture PSB Total
------------------ ------------- -------------- -------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Rental income......................... $ 9,810 $ 5,314 $ 34,053 $ 49,177
Other income.......................... 357 176 1,811 2,344
------------------ ------------- -------------- -------------
Total revenues........................ 10,167 5,490 35,864 51,521
------------------ ------------- -------------- -------------
Cost of operations.................... 3,028 2,365 9,577 14,970
Depreciation.......................... 1,112 1,538 8,376 11,026
Other expenses........................ 953 28 1,257 2,238
------------------ ------------- -------------- -------------
Total expenses........................ 5,093 3,931 19,210 28,234
------------------ ------------- -------------- -------------
Net income before minority interest... 5,074 1,559 16,654 23,287
Minority interest .................... - - (5,911) (5,911)
------------------ ------------- -------------- -------------
Net income............................ $ 5,074 $ 1,559 $ 10,743 $ 17,376
================== ============= ============== =============
At March 31, 2000:
Real estate, net ..................... $ 69,801 $ 219,749 $ 828,207 $ 1,117,757
Total assets.......................... 96,696 224,293 897,428 1,218,417
Total liabilities..................... 51,824 4,379 54,020 110,223
Minority interest..................... - - 288,797 288,797
Total equity.......................... 44,872 219,914 554,611 819,397
The Company's investment (book value)
at March 31, 2000................... $ 161,677 $ 65,974 $ 247,991 $ 475,642
The Company's effective average
ownership interest at March 31, 2000 46% 30% 41%
</TABLE>
11
<PAGE>
6. Revolving line of credit
------------------------
The credit agreement (the "Credit Facility") has a borrowing limit
of $150 million and an expiration date of July 1, 2002. The expiration date
may be extended by one year on each anniversary of the credit agreement.
Interest on outstanding borrowings is payable monthly. At our option, the
rate of interest charged is equal to (i) the prime rate or (ii) a rate
ranging from the London Interbank Offered Rate ("LIBOR") plus 0.40% to
LIBOR plus 1.10% depending on the Company's credit ratings and coverage
ratios, as defined. In addition, the Company is required to pay a quarterly
commitment fee of 0.250% (per annum). The Credit Facility allows us, at our
option, to request the group of banks to propose the interest rate they
would charge on specific borrowings not to exceed $50 million; however, in
no case may the interest rate proposal be greater than the amount provided
by the Credit Facility. At March 31, 2000, we had no borrowing on our line
of credit.
7. Minority interest
-----------------
In consolidation, we classify ownership interests in the net
assets of each of the Consolidated Entities, other than our own, as
minority interest on the consolidated financial statements. Minority
interest in income consists of the minority interests' share of the
operating results of the Company relating to the consolidated operations of
the Consolidated Entities.
In November 1999, we formed a second development joint venture
with a joint venture partner to develop $100 million of storage facilities
and to purchase $100 million of the Company's Equity Stock, Series AAA. The
joint venture is funded solely with equity capital consisting of 51% from
the Company and 49% from the joint venture partner. The joint venture is
consolidated and, accordingly, the Equity Stock, Series AAA is eliminated
in consolidation. Included in minority interest is $67.1 million
contributed by the joint venture partner since inception of the venture.
On March 17, 2000, we issued $240.0 million of 9.5% Series N
Cumulative Redeemable Perpetual Preferred Units and on March 29, 2000, we
issued $75.0 million of 9.125% Series O Cumulative Redeemable Perpetual
Preferred Units in one of our operating partnerships. The units are not
redeemable during the first 5 years, thereafter, at our option, we can call
the units for redemption at the issuance amount plus any unpaid
distributions. The units are not redeemable by the holder. Subject to
certain conditions, the Series N preferred units are convertible into
shares of 9.5% Series N Cumulative Preferred Stock and the Series O
preferred units are convertible into shares of 9.125% Series O Cumulative
Preferred Stock of the Company. These transactions had the effect of
increasing minority interest by $315 million. For the three months ended
March 31, 2000, these preferred units were paid in aggregate approximately
$925,000 in distributions and received a corresponding allocation of
minority interest in earnings.
In connection with the merger with Storage Trust in March 1999,
minority interest increased by approximately $27,009,000, reflecting the
fair value of operating partnership units ("OP Units") in Storage Trust's
operating partnership owned by minority interests. OP Units are convertible
on a one-for-one basis (subject to certain limitations) into common shares
of the Company at the option of the unitholder. Minority interest in income
with respect to OP Units reflects the OP Units' share of the net income of
the Company, with net income allocated to minority interests with respect
to weighted average outstanding OP Units on a per unit basis equal to
diluted earnings per common share. During the three months ended March 31,
2000, 277,104 OP units were redeemed in connection with the sale of real
estate facilities and other minority interest transactions, and the related
impact on minority interest is included in the transactions summarized
below. As of March 31, 2000, 493,788 of such units are outstanding.
12
<PAGE>
Minority interest was reduced by $6,427,000 in connection with the
disposition of real estate facilities. In addition, in the three months
ended March 31, 2000, the Company acquired interests in the Consolidated
Entities for an aggregate cost of $26,963,000, comprised of $26,613,000
cash and the forgiveness of a note receivable of $350,000; these
acquisitions had the effect of reducing minority interest by $12,542,000,
with the excess of cost over underlying book value ($14,421,000) allocated
to real estate.
8. Shareholders' equity
--------------------
Preferred stock
---------------
At March 31, 2000 and December 31, 1999, we had the following
series of Preferred Stock outstanding:
Dividend Shares Carrying
Series Rate Outstanding Amount
- ------------------------- ------------ ------------- -----------
(Dollar amount in thousands)
Series A 10.000% 1,825,000 $ 45,625
Series B 9.200% 2,386,000 59,650
Series C Adjustable 1,200,000 30,000
Series D 9.500% 1,200,000 30,000
Series E 10.000% 2,195,000 54,875
Series F 9.750% 2,300,000 57,500
Series G 8.875% 6,900 172,500
Series H 8.450% 6,750 168,750
Series I 8.625% 4,000 100,000
Series J 8.000% 6,000 150,000
Series K 8.250% 4,600 115,000
Series L 8.250% 4,600 115,000
Series M 8.750% 2,250 56,250
------------- -----------
Total Senior Preferred Stock 11,141,100 $ 1,155,150
============= ===========
The Series A through Series M preferred stock (collectively the
"Senior Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. Holders of the preferred stock,
except under certain conditions and as noted above, will not be entitled to
vote on most matters. In the event of a cumulative arrearage equal to six
quarterly dividends or failure to maintain a Debt Ratio (as defined) of 50%
or less, holders of all outstanding series of preferred stock (voting as a
single class without regard to series) will have the right to elect two
additional members to serve on the Company's Board of Directors until
events of default have been cured. At March 31, 2000, there were no
dividends in arrears and the Debt Ratio was 3.3%.
13
<PAGE>
Except under certain conditions relating to the Company's
qualification as a REIT, the Senior Preferred Stock is not redeemable prior
to the following dates: Series A - September 30, 2002, Series B - March 31,
2003, Series C - June 30, 1999, Series D - September 30, 2004, Series E -
January 31, 2005, Series F - April 30, 2005, Series G - December 31, 2000,
Series H - January 31, 2001, Series I - October 31, 2001, Series J - August
31, 2002, Series K - January 19, 2004, Series L - March 10, 2004, Series M
- August 17, 2004. On or after the respective dates, each of the series of
Senior Preferred Stock will be redeemable at the option of the Company, in
whole or in part, at $25 per share (or depositary share in the case of the
Series G, Series H, Series I, Series J, Series K, Series L and Series M),
plus accrued and unpaid dividends.
Equity Stock
------------
The Company is authorized to issue 200,000,000 shares of Equity
Stock. The Articles of Incorporation provide that the Equity Stock may be
issued from time to time in one or more series and gives the Board of
Directors broad authority to fix the dividend and distribution rights,
conversion and voting rights, redemption provisions and liquidation rights
of each series of Equity Stock.
In January 2000, we issued 4,300,555 depositary shares (2,200,555
shares as part of a special distribution declared on November 15, 1999 and
2,100,000 shares in a separate public offering) each representing 1/1,000
of a share of Equity Stock, Series A ("Equity Stock A"). The Equity Stock,
Series A ranks on a parity with common stock and junior to the Senior
Preferred Stock with respect to general preference rights and has a
liquidation amount which cannot exceed $24.50 per share. Distributions with
respect to each depositary share shall be the lesser of: a) five times the
per share dividend on the Common Stock or b) $2.45 per annum (prorated for
the year 2000). Except in order to preserve the Company's federal income
tax status as a REIT, we may not redeem the depositary shares before March
31, 2005. On or after March 31, 2005, we may, at our option, redeem the
depositary shares at $24.50 per depositary share. If the Company fails to
preserve its federal income tax status as a REIT, the depositary shares
will be convertible into common stock on a one for one basis. The
depositary shares are otherwise not convertible into common stock. Holders
of depositary shares vote as a single class with our holders of common
stock on shareholder matters, but the depositary shares have the equivalent
of one-tenth of a vote per depositary share. We have no obligation to pay
distributions if no distributions are paid to common shareholders.
In June 1997, we contributed $22,500,000 (225,000 shares) of
equity stock, now designated as Equity Stock, Series AA ("Equity Stock AA")
to a partnership in which we are the general partner. As a result of this
contribution, we obtained a controlling interest in the partnership and
began to consolidate the accounts of the partnership and therefore the
equity stock is eliminated in consolidation. The Equity Stock AA ranks on a
parity with Common Stock and junior to the Senior Preferred Stock with
respect to general preference rights and has a liquidation amount of ten
times the amount paid to each Common Share up to a maximum of $100 per
share. Quarterly distributions per share on the Equity Stock AA are equal
to the lesser of (i) 10 times the amount paid per Common Stock or (ii)
$2.20. We have no obligation to pay distributions if no distributions are
paid to common shareholders.
14
<PAGE>
In November 1999, we sold $100,000,000 (4,289,544 shares) of
Equity Stock, Series AAA ("Equity Stock AAA") to a newly formed joint
venture. We control the joint venture and consolidate the accounts of the
joint venture, and accordingly the Equity Stock AAA is eliminated in
consolidation. The Equity Stock AAA ranks on a parity with common stock and
junior to the Senior Preferred Stock (as defined below) with respect to
general preference rights, and has a liquidation amount equal to 120% of
the amount distributed to each common share. Annual distributions per share
are equal to the lesser of (i) five times the amount paid per common share
or (ii) $2.1564. We have no obligation to pay distributions if no
distributions are paid to common shareholders.
Common Stock
------------
During the three months ended March 31, 1999, the Company issued
105,834 shares of common stock in connection with the exercise of stock
options.
As previously announced, the Company's Board of Directors
authorized the repurchase from time to time of up to 15,000,000 shares of
the Company's common stock on the open market or in privately negotiated
transactions. In the quarter ended March 31, 2000, the Company repurchased
a total of 1,380,300 shares, for a total aggregate cost of approximately
$30.7 million. From the initial authorization through March 31, 2000, the
Company has repurchased a total of 8,789,127 shares of common stock at an
aggregate cost of approximately $211.6 million. From April 1, 2000 through
April 26, 2000, the Company has repurchased 129,600 shares at an aggregate
cost of approximately $2.9 million.
Class B Common Stock
--------------------
The Class B Common Stock was eligible to receive distributions
commencing January 1, 2000 and will participate in distributions at the
rate of 97% of the per share distributions on the Common Stock, provided
that cumulative distributions of at least $0.22 per quarter per share have
been paid on the Common Stock, (i) not participate in liquidating
distributions, (ii) not be entitled to vote (except as expressly required
by California law) and (iii) automatically convert into Common Stock, on a
share for share basis, upon the later to occur of FFO per common share
aggregating $3.00 during any period of four consecutive calendar quarters
or January 1, 2003.
For these purposes, FFO means net income (loss) before (i) gain
(loss) on early extinguishment of debt, (ii) minority interest in income
and (iii) gain (loss) on disposition of real estate, adjusted as follows:
(i) plus depreciation and amortization, and (b) less FFO attributable to
minority interest. FFO per common share means FFO less preferred stock
dividends and equity stock, Series A dividends divided by the outstanding
weighted average shares of Common Stock assuming conversion of all
outstanding convertible securities and the Class B Common Stock.
For these purposes, FFO per share of Common Stock (as defined
above) was $2.57 for the four consecutive calendar quarters ended March 31,
2000.
15
<PAGE>
Dividends
---------
The following summarizes dividends during the first three months
of 2000:
Distributions Per
Share or
Depositary Share Total Distributions
---------------- -------------------
Series A ............................. $ 0.625 $ 1,140,000
Series B ............................. $ 0.575 1,372,000
Series C ............................. $ 0.431 517,000
Series D ............................. $ 0.594 713,000
Series E ............................. $ 0.625 1,372,000
Series F ............................. $ 0.609 1,401,000
Series G ............................. $ 0.555 3,828,000
Series H ............................. $ 0.528 3,565,000
Series I ............................. $ 0.539 2,156,000
Series J ............................. $ 0.500 3,000,000
Series K ............................. $ 0.516 2,372,000
Series L ............................. $ 0.516 2,372,000
Series M ............................. $ 0.547 1,230,000
-------------------
25,038,000
Equity Stock, Series A ............... $ 0.525 2,258,000
Common ............................... $ 0.220 27,590,000
Common, Series B ..................... $ 0.213 1,494,000
-------------------
Total dividends ................... $56,380,000
===================
At December 31, 1999, the Company had accrued distributions
totaling $82,086,000 ($0.64 per share) of the common dividend for 1999, of
which $38,076,000 was paid on January 14, 2000 in cash and $44,010,000 was
paid in the issuance of depositary shares of the Company's Equity Stock,
Series A.
The dividend rate on the Series C Preferred Stock for the first
quarter of 2000 was equal to 6.897% per annum. The dividend rate per annum
will be adjusted quarterly and will be equal to the highest of one of three
U.S. Treasury indices (Treasury Bill Rate, Ten Year Constant Maturity Rate,
or Thirty Year Constant Maturity Rate) multiplied by 110%. However, the
dividend rate for any dividend period will neither be less than 6.75% per
annum nor greater than 10.75%. The dividend rate for the quarter ending
June 30, 2000 will be equal to 6.974% per annum.
9. Segment Information
-------------------
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 financial statements for periods beginning
after December 15, 1997. We adopted this standard effective for the year
ended December 31, 1998. For information regarding the description of each
reportable segment, policies relating to the measurement of segment profit
or loss, and segment assets, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1999.
16
<PAGE>
Our income statement provides most of the information required in
order to determine the performance of each of our three segments. The
following tables reconcile the performance of each segment, in terms of
segment revenues and segment income, our consolidated revenues and net
income. It further provides detail of the segment components of the income
statement item, "Equity in earnings of real estate entities."
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
2000 1999 Change
----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF REVENUES BY SEGMENT:
- --------------------------------------
Self storage
- ------------
<S> <C> <C> <C>
Self-storage property rentals ........................... $ 154,634 $ 129,029 $ 25,605
Equity in earnings - self storage property operations ... 5,249 4,233 1,016
Interest and other income - self storage property
management operations ................................ 1,090 1,159 (69)
----------- ----------- -----------
Self storage segment revenues ....................... 160,973 134,421 26,552
----------- ----------- -----------
Portable self storage ..................................... 7,549 5,428 2,121
- ---------------------- ----------- ----------- -----------
Commercial properties
- ----------------------
Commercial property rentals ............................. 2,759 1,914 845
Equity in earnings - commercial property operations ..... 9,829 8,456 1,373
----------- ----------- -----------
Commercial properties segment revenues ............. 12,588 10,370 2,218
----------- ----------- -----------
Other items not allocated to segments:
- --------------------------------------
Equity in earnings - Depreciation (self storage) ........ (1,642) (1,458) (184)
Equity in earnings - Depreciation (commercial properties) (3,390) (2,670) (720)
Equity in earnings - general and administrative and other (1,770) (439) (1,331)
Interest and other income excluding property management
operations ........................................... 2,287 2,363 (76)
----------- ----------- -----------
Total other items not allocated to segments ......... (4,515) (2,204) (2,311)
----------- ----------- -----------
Total revenues ...................................... $ 176,595 $ 148,015 $ 28,580
=========== =========== ===========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
2000 1999 Change
----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF NET INCOME BY SEGMENT:
- ----------------------------------------
Self storage
<S> <C> <C> <C>
Self-storage properties ................................. $ 104,277 $ 88,400 $ 15,877
Facility management...................................... 1,090 1,159 (69)
Equity in earnings - self storage property operations.... 5,249 4,233 1,016
----------- ----------- -----------
Total self storage segment net income................ 110,616 93,792 16,824
----------- ----------- -----------
Portable self storage (1,832) (3,936) 2,104
- ---------------------- ----------- ----------- -----------
Commercial properties
- ---------- ----------
Commercial properties.................................... 1,810 1,276 534
Equity in earnings - commercial property operations...... 9,829 8,456 1,373
----------- ----------- -----------
Total commercial property segment net income......... 11,639 9,732 1,907
----------- ----------- -----------
Other items not allocated to segments:
- --------------------------------------
Equity in earnings - depreciation (self-storage) ........ (1,642) (1,458) (184)
Equity in earnings - depreciation (commercial properties) (3,390) (2,670) (720)
Equity in earnings - general and administrative and other (1,770) (439) (1,331)
Depreciation - self storage.............................. (34,435) (28,550) (5,885)
Depreciation - commercial properties..................... (446) (424) (22)
Interest and other income................................ 2,287 2,363 (76)
General and administrative............................... (2,671) (2,011) (660)
Interest expense......................................... (1,406) (1,204) (202)
Minority interest in income.............................. (4,389) (3,353) (1,036)
----------- ----------- -----------
Total other items not allocated to segments.......... (47,862) (37,746) (10,116)
----------- ----------- -----------
Total net income .................................... $ 72,561 $ 61,842 $ 10,719
=========== =========== ===========
</TABLE>
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto.
FORWARD LOOKING STATEMENTS: When used within this document, the words
"expects," "believes," "anticipates," "should," "estimates," and similar
expressions are intended to identify "forward-looking statements" within the
meaning of that term in Section 27A of the Securities Exchange Act of 1933, as
amended, and in Section 21F of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors, which may cause the actual results and performance of the
Company 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 self-storage and commercial facilities which could impact rents
and occupancy levels at the Company's facilities; the Company's ability to
evaluate, finance, and integrate acquired and developed properties into the
Company's existing operations; the Company's ability to effectively compete in
the markets that it does business in; the impact of the regulatory environment
as well as national, state, and local laws and regulations including, without
limitation, those governing Real Estate Investment Trusts; the acceptance by
consumers of the Pickup and Delivery concept; the impact of general economic
conditions upon rental rates and occupancy levels at the Company's facilities;
and the availability of permanent capital at attractive rates.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Net income for the three months ended March 31, 2000 was $72,561,000
compared to $61,842,000 for the same period in 1999, representing an increase of
$10,719,000 or 17.3%. The increase in net income was primarily the result of
improved property operations and the acquisition of additional real estate
investments during 1999 and 2000 (including the merger with Storage Trust, which
occurred on March 12, 1999).
Net income allocable to common shareholders was $45,265,000 or $0.34
per common share on a diluted basis (based on 132,902,000 weighted average
common equivalent shares) for the three months ended March 31, 2000. For the
same period in 1999, net income allocable to common shareholders was $40,312,000
or $0.34 per common share on a diluted basis (based on 119,014,000 weighted
average common equivalent shares). In computing net income allocable to common
shareholders for each period, aggregate dividends paid to the holders of the
Equity Stock, Series A and preferred stock have been deducted from net income in
determining net income allocable to the common shareholders. Commencing January
1, 2000, the Company's 7,000,000 Class B common shares outstanding began to
participate in distributions of the Company's earnings. Distributions per share
of Class B common stock are equal to 97% of the per share distribution paid to
the Company's regular common shares. As a result of this participation in
distribution of earnings, for purposes of computing net income per common share,
the Company began to include 6,790,000 (7,000,000 x 97%) Class B common shares
in the weighted average common equivalent shares for the three months ended
March 31, 2000. Weighted average diluted shares for the three months ended March
31, 1999 does not include any shares with respect to the Class B common stock as
these shares were not participating in distributions of the Company's earnings
prior to January 1, 2000.
REAL ESTATE OPERATIONS
- --------------------------------------------------------------------------------
Rental income and cost of operations have increased for the three
months ended March 31, 2000 compared to the same period in 1999 due to our
merger and acquisition activities throughout 1999 and 2000, most notably the
merger with Storage Trust on March 12, 1999. As a result of these items, the
number of facilities included in the Company's consolidated financial statements
has increased from 1,168 at March 31, 1999 to 1,209 at March 31, 2000.
19
<PAGE>
SELF-STORAGE OPERATIONS: The following table summarizes the operating
results (before depreciation) of (i) the 946 self-storage facilities that we
owned as of December 31, 1998 (the "Consistent Group") and (ii) all other
facilities for which operations were not reflected in the Company's financial
statements throughout the three months ended March 31, 2000 and the same period
in 1999 (the "Other Facilities"):
SELF-STORAGE OPERATIONS: Three months ended
- ------------------------ March 31,
----------------------- Percentage
2000 1999 Change
---------- ---------- ----------
(Dollar amounts in thousands, except
per square foot amounts)
Rental income:
- --------------
Consistent Group....................... $ 129,974 $ 125,924 3.2%
Other Facilities....................... 24,660 3,105 694.2%
---------- ---------- ----------
154,634 129,029 19.8%
---------- ---------- ----------
Cost of operations:
- -------------------
Consistent Group....................... 40,353 38,849 3.9%
Other Facilities....................... 10,004 1,780 462.0%
---------- ---------- ----------
50,357 40,629 23.9%
---------- ---------- ----------
Net operating income:
- ---------------------
Consistent Group....................... 89,621 87,075 2.9%
Other Facilities....................... 14,656 1,325 1006.1%
---------- ---------- ----------
$ 104,277 $ 88,400 18.0%
========== ========== ==========
Consistent Group data:
- ----------------------
Gross margin........................... 69.0% 69.1% (0.1)%
Weighted average :
Occupancy........................... 91.4% 91.0% 0.4%
Realized annual rent per square foot. $10.15 $9.89 2.6%
Scheduled annual rent per square foot $10.52 $10.27 2.4%
Number of facilities:
Consistent group....................... 946 946 -
Other Facilities....................... 251 218 15.1%
Net rentable sq. ft.(in thousands):
Consistent group....................... 56,050 56,050 -
Other Facilities....................... 14,895 12,830 16.1%
Rental income for the three months ended March 31, 2000 is net of
promotional discounts totaling $5.7 million compared to $4.2 million for the
same period in 1999. In addition, included in cost of operations for the three
months ended March 31, 2000 are costs associated with the telephone reservation
center and advertising totaling $4.9 million, compared to $4.0 million for the
same period in 1999. During the three months ended March 31, 2000, the Company
opened seven newly constructed storage facilities, which had an aggregate cost
of approximately $34.4 million. Rental income and cost of operations included
above with respect to these facilities totaled approximately $31,000 and
$131,000, respectively, for the three months ended March 31, 2000.
COMMERCIAL PROPERTY OPERATIONS:. Our commercial property operations
principally consist of our investment in PSB, an affiliated real estate
investment trust, and to a much lesser extent commercial space owned by the
Company and Consolidated Entities. The following table sets forth the historical
commercial property amounts included in the financial statements:
20
<PAGE>
COMMERCIAL PROPERTY OPERATIONS Three months ended
- ------------------------------ March 31,
------------------------
2000 1999 Change
---------- ---------- -------
(Amounts in thousands)
Rental income.............................. $ 2,759 $ 1,914 44.1%
Cost of operations......................... 949 638 48.7%
---------- ---------- -------
Net operating income....................... $ 1,810 $ 1,276 41.8%
========== ========== ======-
PORTABLE SELF-STORAGE OPERATIONS: At March 31, 2000, PSPUD operated 36
facilities. Due to the start-up nature of the business, PSPUD incurred operating
losses totaling approximately $1,832,000 and $3,936,000 in the three months
ended March 31, 2000 and 1999, respectively, summarized as follows:
PORTABLE SELF-STORAGE
- ---------------------
Three months ended
March 31,
--------------------
2000 1999 Change
-------- -------- --------
Rental and Other Income .................... $ 7,549 $ 5,428 $ 2,121
Cost of Operations:
Direct Operating Costs ................... 5,156 4,609 547
Marketing and Advertising ................ 444 422 22
Facility lease expense ................... 2,254 2,800 (546)
-------- -------- --------
Total cost of operations ............ 7,854 7,831 23
Operating loss prior to depreciation
and G&A ................................ (305) (2,403) 2,098
Depreciation (A) ........................... 1,153 1,182 (29)
General and Administrative (A) ............. 374 351 23
-------- -------- --------
Operating losses ........................... $(1,832) $(3,936) $ 2,104
======== ======== ========
(A) Amounts reflect that portion of consolidated depreciation and general and
administrative expense that is directly attributable to the portable
self-storage business.
Until the PSPUD facilities are operating profitable, PSPUD's operations
are expected to continue to adversely impact the Company's earnings and cash
flows. There can be no assurances as to the level of PSPUD's expansion, level of
gross rentals, level of move-outs or profitability.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our
ownership of equity interests in PSB, we had general and limited partnership
interests in 12 limited partnerships at March 31, 2000. (PSB and the limited
partnerships are collectively referred to as the "Unconsolidated Entities.") Due
to our limited ownership interest and control of these entities, we do not
consolidate the accounts of these entities for financial reporting purposes, and
account for such investments using the equity method.
Equity in earnings of real estate entities for the year ended March 31,
2000 consists of our pro rata share of the Unconsolidated Entities based upon
our ownership interest for the period. Similar to the Company, the
Unconsolidated Entities (other than PSB) generate substantially all of their
income from their ownership of storage facilities, which we manage. In the
aggregate, the Unconsolidated Entities (including PSB) own a total of 237 real
estate facilities, 111 of which are storage facilities. The following table sets
forth the significant components of equity in earnings of real estate entities:
21
<PAGE>
HISTORICAL SUMMARY: Three months ended
- ------------------- March 31,
---------------------- Dollar
2000 1999 Change
--------- --------- -------
(Amounts in thousands)
Property operations:
PSB.................................... $ 9,829 $ 8,422 $1,407
Development Joint Venture.............. 885 346 539
Other investments...................... 4,364 3,921 443
--------- --------- -------
15,078 12,689 2,389
--------- --------- -------
Depreciation:
PSB.................................... (3,390) (2,668) (722)
Development Joint Venture.............. (461) (261) (200)
Other investments...................... (1,181) (1,200) 19
--------- --------- -------
(5,032) (4,129) (903)
--------- --------- -------
Other: (1)
PSB.................................... (1,536) (826) (710)
Development Joint Venture.............. 53 22 31
Other investments...................... (287) 366 (653)
--------- --------- -------
(1,770) (438) (1,332)
--------- --------- -------
Total equity in earnings of real estate
entities................................. $ 8,276 $ 8,122 $ 154
========= ========= =======
(1) "Other" reflects our share of general and administrative expense,
interest expense, interest income, and other non-property,
non-depreciation related operating results of these entities.
The increase in 2000 equity in earnings of real estate entities
compared to 1999 is principally the result of improved operations of PSB. Equity
in Earnings with respect to the Development Joint Venture represent our pro rata
share of the operating results of an unconsolidated joint venture formed in
April 1997 in which we have a 30% ownership interest. The joint venture was
formed for the purpose of developing approximately $220 million of self-storage
facilities. As of March 31, 2000, 44 of the joint venture's 47 properties are
completed and operating, substantially all of which are in the fill-up process
and have not reached stabilized occupancy levels.
OTHER INCOME AND EXPENSE ITEMS
- --------------------------------------------------------------------------------
INTEREST AND OTHER INCOME: The net operating results from our property
management operations and merchandise sales are presented along with interest
and other income, as "interest and other income." The components of interest and
other income are detailed as follows:
22
<PAGE>
Three months ended
March 31,
-------------------------
2000 1999 Change
----------- ----------- --------
(Amounts in thousands)
Facility management:
Revenues........................... $ 1,301 $ 1,414 (8.0)%
Cost of operations................. 211 255 (17.3)%
----------- ----------- --------
Net operating income 1,090 1,159 (6.0)%
----------- ----------- --------
Sales of packaging material and truck
rental income:
Revenues........................... 3,668 2,135 71.8%
Cost of operations................. 3,450 1,810 90.6%
----------- ----------- --------
Net operating income............. 218 325 (32.9)%
Interest and other income............. 2,069 2,038 1.5%
----------- ----------- --------
Total interest and other income..... $ 3,377 $ 3,522 (4.1)%
=========== =========== ========
Facility management operations are primarily attributable to management
of self-storage properties. At March 31, 2000, we managed 159 storage
facilities.
Sales of packaging material and truck rentals have increased as a
result of opening additional stores, as well as increases at our existing
stores.
Interest and other income is primarily attributable to interest income
on cash balances and interest income from mortgage notes receivable.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
has increased $5,878,000 to $36,034,000 for the three months ended March 31,
2000 as compared to $30,156,000 for the same period in 1999. These increases are
principally due to the acquisition of additional real estate facilities during
1999 and 2000. Amortization expense with respect to intangible assets totaled
$2,328,000 for the three months ended March 31, 2000 and 1999.
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Entities, which are not
owned by the Company. Minority interest in income for the three months ended
March 31, 2000 was $4,389,000 compared to $3,353,000 for the same period in
1999.
In November 1999, we formed a joint venture partnership for the purpose
of developing approximately $100 million of self-storage facilities and to
purchase $100 million of our Equity Stock, Series AAA. The venture, which has
been consolidated, is funded solely with equity capital consisting of 51% from
us and 49% from the joint venture partner. Minority interest in income includes
approximately $68,000 of loss allocated to our joint venture partner. As of
March 31, 2000, our joint venture partner had invested approximately $67.1
million.
On March 17, 2000, we issued $240.0 million of 9.5% Series N Cumulative
Redeemable Perpetual Preferred Units and on March 29, 2000, we issued $75.0
million of 9.125% Series O Cumulative Redeemable Perpetual Preferred Units in
one of our consolidated operating partnerships. The issuance of preferred
partnership units had the effect of increasing minority interest by $315
million. For the three months ended March 31, 2000, these preferred units were
paid in aggregate approximately $925,000 in distributions and received a
corresponding allocation of minority interest in earnings for the partial period
in which the units were outstanding.
On March 30, 2000, we acquired the remaining minority interest in one
of our consolidated partnerships. The aggregate cost of the acquisition was
approximately $23.6 million in cash. Minority interest in income for the three
months ended March 31, 2000, includes income allocated to these interests of
approximately $602,000.
23
<PAGE>
SUPPLEMENTAL PROPERTY DATA AND TRENDS
- --------------------------------------------------------------------------------
At March 31, 2000, there were approximately 46 ownership entities
owning in aggregate 1,316 storage facilities, including the facilities which we
own and/or operate. At March 31, 2000, 111 of these facilities were owned by
Unconsolidated Entities, entities in which we have an ownership interest and use
the equity method for financial statement presentation. The remaining 1,205
facilities are owned by the Company and Consolidated Entities.
The following table summarizes our investment in real estate facilities
as of March 31, 2000:
<TABLE>
<CAPTION>
Number of Facilities in which the Net Rentable Square Footage
Company has an ownership interest (in thousands)
---------------------------------- ----------------------------------
Self-Storage Commercial Self-Storage Commercial
Facilities Properties Total Facilities Properties Total
------------ ---------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Wholly-owned facilities.................... 608 4 612 37,123 307 37,430
Facilities owned by Consolidated Entities.. 597 - 597 34,700 - 34,700
------------ ---------- -------- ------------ ---------- --------
Total consolidated facilities.......... 1,205 4 1,209 71,823 307 72,130
Facilities owned by Unconsolidated Entities 111 126 237 6,516 12,539 19,055
------------ ---------- -------- ------------ ---------- --------
Total facilities in which the Company
has an ownership interest............ 1,316 130 1,446 78,339 12,846 91,185
============ ========== ======== ============ ========== ========
</TABLE>
In order to evaluate how our overall portfolio has performed,
management analyzes the operating performance of a consistent group of
self-storage facilities representing 965 (56.5 million net rentable square feet)
of the 1,316 self-storage facilities (herein referred to as "Same Store"
self-storage facilities). The 965 facilities represent a pool of properties,
which have been operated under the "Public Storage" name, at a stabilized level,
by the Company since January 1, 1994. From time to time, the Company removes
facilities from the "Same Store" pool as a result of expansions or other
activities, which make such facilities' results not comparable to previous
periods. The Same Store group of properties includes 896 consolidated facilities
and 69 facilities owned by Unconsolidated Entities. The following table
summarizes the pre-depreciation historical operating results of the Same Store
self-storage facilities:
SAME STORE SELF-STORAGE FACILITIES: Three months ended
- ----------------------------------- March 31,
(historical property operations) ------------------ Percentage
2000 1999 Change
---------- ---------- ----------
(Amounts in thousands,
except rent per square foot)
Rental income ........................ $ 133,078 $128,590 3.5%
Cost of operations (includes an
imputed 6% property management fee)
(1)................................. 47,529 46,274 2.7%
---------- ---------- ----------
Net operating income ................. $ 85,549 $ 82,316 3.9%
========== ========== ==========
Gross profit margin (2) .............. 64.3% 64.0% 0.3%
WEIGHTED AVERAGE:
Occupancy .......................... 91.7% 91.3% 0.4%
Realized annual rent per sq. ft (3) $ 10.28 $ 9.98 3.0%
Scheduled annual rent per sq. ft (3) $ 10.65 $ 10.39 2.5%
-----------------------------------------------------------------------------
1. Cost of operations includes both direct and indirect costs of
ownership, management and operations of the properties. Cost of
operations includes a 6% management fee on all facilities, including
those facilities owned by the Company for which no fee is paid.
24
<PAGE>
2. Gross profit margin is computed by dividing property net operating
income (before depreciation expense) by rental revenues. The gross
profit margin excluding the facility management fee was 70.3%, and
70.0% for the three months ended March 31, 2000 and 1999, respectively.
3. Realized rent per square foot as presented throughout this report
represents the actual revenue earned per occupied square foot.
Management believes this is a more relevant measure than the scheduled
rental rates, since scheduled rates can be discounted through the use
of promotions.
Rental income for the Same Store facilities included promotional
discounts totaling $4.5 million for the three months ended March 31, 2000
compared to $4.0 million for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
We believe that our internally generated net cash provided by operating
activities will continue to be sufficient to enable it to meet our operating
expenses, capital improvements, debt service requirements and distributions to
shareholders for the foreseeable future.
Operating as a real estate investment trust ("REIT"), our ability to
retain cash flow for reinvestment is restricted. In order for us to maintain our
REIT status, a substantial portion of our operating cash flow must be used to
make distributions to our shareholders (see "REIT STATUS" below). However,
despite the significant distribution requirements, we have been able to retain a
significant amount of our operating cash flow. The following table summarizes
our ability to make the minority interests' distributions, dividend payments to
the preferred shareholders and capital improvements to maintain the facilities
through the use of cash provided by operating activities. The remaining cash
flow generated is available to make both scheduled and optional principal
payments on debt and for reinvestment.
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------
2000 1999
------------ ------------
(Amounts in thousands)
<S> <C> <C>
Net income........................................................................... $ 72,561 $ 61,842
Depreciation and amortization........................................................ 36,034 30,156
Less - Depreciation with respect to non real estate assets........................... (1,153) (1,182)
Depreciation from Unconsolidated Entities............................................ 5,032 4,129
Minority interest in income.......................................................... 4,389 3,353
------------ ------------
Net cash provided by operating activities.......................................... 116,863 98,298
Distributions from operations to minority interests.................................. (6,178) (5,664)
------------ ------------
Cash from operations allocable to the Company's shareholders......................... 110,685 92,634
Less: preferred stock dividends...................................................... (25,038) (21,530)
Less: equity stock, Series A dividends............................................... (2,258) -
------------ ------------
Cash from operations available to common shareholders................................ 83,389 71,104
Capital improvements to maintain facilities:......................................... (4,126) (2,935)
Add back: minority interest share of capital improvements to maintain facilities..... 66 192
------------ ------------
Funds available for principal payments on debt, common dividends and reinvestment.... 79,329 68,361
Cash distributions to common shareholders............................................ (29,084) (28,332)
------------ ------------
Funds available for principal payments on debt and reinvestment...................... $ 50,245 $ 40,029
============ ============
</TABLE>
25
<PAGE>
We expect to fund our growth strategies with cash on hand at March 31,
2000, internally generated retained cash flows, proceeds from issuing equity
securities and borrowings under our $150 million credit facility. We intend to
repay amounts borrowed under the credit facility from undistributed operating
cash flow or, as market conditions permit and are determined to be advantageous,
from the public or private placement of equity securities.
Our portfolio of real estate facilities remains substantially
unencumbered. At March 31, 2000, we had mortgage debt outstanding of $28.7
million and had consolidated real estate facilities with a book value of $3.4
billion. We have not financed our acquisitions with debt and generally our
borrowing has increased through the assumption of pre-existing debt on acquired
real estate facilities, including $100 million in debt assumed in connection
with the merger with Storage Trust.
During the first quarter of 2000, we issued $240.0 million of 9.5%
Series N Cumulative Redeemable Perpetual Preferred Units (issued March 17, 2000)
and $75.0 million of 9.125% Series O Cumulative Redeemable Perpetual Preferred
Units (issued March 29, 2000) in one of our operating partnerships. The units
are not redeemable during the first 5 years, thereafter, at our option, we can
call the units for redemption at the issuance amount plus any unpaid
distributions. The units are not redeemable by the holder. Subject to certain
conditions, the Series N preferred units are convertible into shares of 9.5%
Series N Cumulative Preferred Stock and the Series O preferred units are
convertible into shares of 9.125% Series O Cumulative Preferred Stock of the
Company. The net proceeds raised through the issuance of the preferred units are
expected to be used primarily to fund our development activities.
DISTRIBUTION REQUIREMENTS: Our conservative distribution policy has
been the principal reason for the Company's ability to retain significant
operating cash flows which have been used to make additional investments and
reduce debt. During the three months ended March 31, 2000 and 1999, we
distributed to common shareholders approximately 34.9% and 39.8% of our cash
available from operations allocable to common shareholders, respectively.
During the three months ended March 31,2000, we paid cash dividends
totaling $25,038,000 to the holders of our Senior Preferred Stock and $2,258,000
to the holders of Equity Stock, Series A. We estimate the regular distribution
requirements for fiscal 2000 with respect to Senior Preferred Stock outstanding
at March 31, 2000 to be approximately $100.2 million. With respect to the Equity
Stock, Series A issued in January 2000, the prorated annual distribution for
2000 (assuming that at least $0.49 is paid per common share) is approximately
$10.2 million.
During the three months ended March 31, 2000, we paid dividends
totaling $111,170,000 to the holders of our common stock which includes a
special distribution of approximately $82,086,000 related to fiscal 1999. The
special distribution was paid on January 14, 2000 to our common shareholders and
consisted of $38,076,000 in cash and $44,010,000 in the issuance of depositary
shares of Equity Stock, Series A. On March 31, 2000 we paid cash dividends
totaling $27,590,000 to common shareholders and $1,494,000 to Class B common
shareholders. Distributions with respect to the classes of common stock will be
determined based upon our REIT distribution requirements after taking into
consideration distributions to the Company's preferred shareholders.
CAPITAL IMPROVEMENT REQUIREMENTS: During 2000, we have budgeted
approximately $26.2 million for capital improvements. The minority interests'
share of the budgeted capital improvements is approximately $0.7 million. During
the three months ended March 31, 2000, we incurred capital improvements of
approximately $4.1 million.
DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our note payable, all of which is fixed rate.
At March 31, 2000, we had total outstanding notes payable of approximately
$166.7 million. Approximate principal maturities of notes payable at March 31,
2000 are as follows:
26
<PAGE>
Unsecured
Senior Notes Mortgage debt Total
-------------- -------------- ------------
(in thousands)
2000 (remainder of)....... $ 8,750 $ 2,025 $ 10,775
2001...................... 9,500 2,910 12,410
2002...................... 24,450 3,530 27,980
2003...................... 35,900 3,585 39,485
2004...................... 25,800 15,063 40,863
Thereafter................ 33,600 1,628 35,228
-------------- -------------- ------------
$ 138,000 $ 28,741 $ 166,741
============== ============== ============
Weighted average rate..... 7.4% 10.3% 7.9%
============== ============== ============
REPURCHASES OF THE COMPANY'S COMMON STOCK: As previously announced, our
Board of Directors authorized the repurchase from time to time of up to
15,000,000 shares of the Company's common stock in the open market or in
privately negotiated transactions. In the quarter ended March 31, 2000, we
repurchased a total of 1,380,300 shares, for a total aggregate cost of
approximately $30.7 million. From the initial authorization through March 31,
2000, the Company has repurchased a total of 8,789,127 shares of common stock at
an aggregate cost of approximately $211.6 million. From April 1, 2000 through
April 26, 2000, we have repurchased 129,600 shares at an aggregate cost of
approximately $2.9 million.
DEVELOPMENT OF SELF-STORAGE FACILITIES: As previously announced, in
April 1997, we formed a joint venture partnership with an institutional investor
for the purpose of developing up to $220 million of self-storage facilities. The
joint venture is funded solely with equity capital consisting of 30% from us and
70% from the institutional investor. Our share of the cost of the real estate in
the joint venture is approximately $68 million at March 31, 2000.
As of March 31, 2000, the joint venture had 44 operating facilities,
with 2,659,000 net rentable square feet and total development costs of
approximately $211.8 million. As of March 31, 2000, the joint venture is
developing three additional projects (approximately 221,000 net rentable square
feet) that were in process, with total costs incurred of $15.3 million and
estimated remaining costs to complete of $2.8 million.
In November 1999, we formed a second joint venture partnership for the
development of approximately $100 million of self-storage facilities. The
venture is funded solely with equity capital consisting of 51% from us and 49%
from the joint venture partner. At March 31, 2000, the second development joint
venture was committed to develop 8 facilities (approximately 530,000 net
rentable sq. ft.) with an estimated development cost of approximately $39.4
million, of which five facilities (approximately 304,000 net rentable sq. ft.)
were completed with an aggregate cost of approximately $22.0 million. As of
March 31, 2000, the second development joint venture is developing three
additional projects (approximately 226,000 net rentable square feet) that were
in process, with total costs incurred of $14.9 million and estimated remaining
costs to complete of $2.5 million. We have submitted 14 additional facilities
for approval with total estimated costs of approximately $67.7 million; we have
incurred approximately $25.2 million through March 31, 2000 with respect to
these 14 projects, and upon approval, these projects will be transferred to the
joint venture and the joint venture partner will contribute its 49% share.
Excluding the 14 properties that are being reviewed by the second
development joint venture and the six properties that the two joint ventures are
developing, we are developing 23 additional storage facilities. At March 31,
2000, we had incurred costs of $79.2 million with respect to these 23 facilities
(estimated remaining costs to complete of approximately $79.1 million). We have
also identified 18 additional storage facilities for development, with total
estimated costs of approximately $113.6 million. These projects are subject to
significant contingencies.
27
<PAGE>
REIT STATUS: We believe that we have operated, and intend to continue
to operate, in such a manner as to qualify as a REIT under the Internal Revenue
Code of 1986, but no assurance can be given that we will at all times so
qualify. To the extent that we continue to qualify as a REIT, we will not be
taxed, with certain limited exceptions, on the taxable income that is
distributed to our shareholders, provided that at least 95% of our taxable
income is so distributed prior to filing of our tax return. We have satisfied
the REIT distribution requirement since 1980.
FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $110,685,000 for the three months ended March 31, 2000 compared to
$92,634,000 for the same period in 1999. FFO available to common shareholders
(after deducting preferred stock dividends) increased to $83,389,000 for the
three months ended March 31, 2000 compared to $71,104,000 for the same period in
1999. FFO means net income or (loss) (computed in accordance with generally
accepted accounting principles) before: (i) gain or (loss) on early
extinguishment of debt, (ii) minority interest in income and (iii) gain or
(loss) on the disposition of real estate, adjusted as follows: (a) plus
depreciation and amortization (including our pro-rata share of depreciation and
amortization of unconsolidated equity interests and amortization of assets
acquired in a merger, including property management agreements and goodwill),
and (b) less FFO attributable to minority interest.
FFO is a supplemental performance measure for equity REITs as defined
by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT").
The NAREIT definition does not specifically address the treatment of minority
interest in the determination of FFO or the treatment of the amortization of
property management agreements and goodwill. In our case, FFO represents amounts
attributable to our shareholders after deducting amounts attributable to the
minority interests and before deductions for the amortization of property
management agreements and goodwill. FFO is presented because management, as well
as many industry analysts, consider FFO to be one measure of our performance and
it is used in establishing the terms of the Class B Common Stock. FFO does not
take into consideration capital improvements, scheduled principal payments on
debt, distributions and our other obligations. Accordingly, FFO is not a
substitute for cash flow or net income (as discussed above) as a measure of our
liquidity or operating performance. FFO is not comparable to similarly entitled
items reported by other REITs that do not define it exactly as we have defined
it.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
To limit our exposure to market risk, we principally finance our
operations and growth with permanent equity capital, consisting of either common
or preferred stock. At March 31, 2000, our debt as a percentage of total
shareholders' equity (based on book values) was 4.4%.
Our preferred stock is not redeemable by the holders. Except under
certain conditions relating to our qualification as a REIT, we may not redeem
the Senior Preferred Stock prior to the following dates: Series A - September
30, 2002, Series B - March 31, 2003, Series C - June 30, 1999, Series D -
September 30, 2004, Series E - January 31, 2005, Series F - April 30, 2005,
Series G - December 31, 2000, Series H - January 31, 2001, Series I - October
31, 2001, Series J - August 31, 2002, Series K - January 19, 2004, Series L -
March 10, 2004 and Series M - August 17, 2004. On or after the respective dates,
each of the series of Senior Preferred Stock will be redeemable at the our
option, in whole or in part, at $25 per share (or depositary share in the case
of the Series G, Series H, Series I, Series J, Series K, Series L and Series M),
plus accrued and unpaid dividends.
Our market risk sensitive instruments include notes payable, which
totaled $166.7 million at March 31, 2000. Substantially all of the Company's
notes payable bear interest at fixed rates. See Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources for approximate principal maturities of the notes payable as
of March 31, 2000.
28
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
3.1 Restated Articles of Incorporation. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.
3.2 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series A. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.3 Certificate of Determination for the 9.20% Cumulative Preferred Stock,
Series B. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.4 Amendment to Certificate of Determination for the 9.20% Cumulative
Preferred Stock, Series B. Filed with Registrant's Registration
Statement No. 33-56925 and incorporated herein by reference.
3.5 Certificate of Determination for the 8.25% Convertible Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.6 Certificate of Determination for the Adjustable Rate Cumulative
Preferred Stock, Series C. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.
3.7 Certificate of Determination for the 9.50% Cumulative Preferred Stock,
Series D. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 9.50% Cumulative Preferred Stock, Series D and
incorporated herein by reference.
3.8 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series E. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 10% Cumulative Preferred Stock, Series E and
incorporated herein by reference.
3.9 Certificate of Determination for the 9.75% Cumulative Preferred Stock,
Series F. Filed with Registration's Form 8-A/A Registration Statement
relating to the 9.75% Cumulative Preferred Stock, Series F and
incorporated herein by reference.
3.10 Certificate of Determination for the Convertible Participating
Preferred Stock. Filed with Registrant's Registration Statement No.
33-63947 and incorporated herein by reference.
3.11 Certificate of Amendment of Articles of Incorporation, Filed with
Registrant's Registration Statement No. 33-63947 and incorporated
herein by reference.
3.12 Certificate of Determination for the 8-7/8% Cumulative Preferred Stock,
Series G. Filed with Registration's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a
Share of 8-7/8% Cumulative Preferred Stock, Series G and incorporated
herein by reference.
3.13 Certificate of Determination for the 8.45% Cumulative Preferred Stock,
Series H. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a
Share of 8.45% Cumulative Preferred Stock, Series H and incorporated
herein by reference.
29
<PAGE>
3.14 Certificate of Determination for the Convertible Preferred Stock,
Series CC. Filed with Registrant's Registration Statement No. 333-03749
and incorporated herein by reference.
3.15 Certificate of Correction of Certificate of Determination for the
Convertible Participating Preferred Stock. Filed with Registrant's
Registration Statement No. 333-08791 and incorporated herein by
reference.
3.16 Certificate of Determination for 8-5/8% Cumulative Preferred Stock,
Series I. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-5/8% Cumulative Preferred Stock, Series I and incorporated herein
by reference.
3.17 Certificate of Amendment of Articles of Incorporation. Filed with
Registrant's Registration Statement No. 333-18395 and incorporated
herein by reference.
3.18 Certification of Determination for Equity Stock, Series A. Filed with
Registrant's Form 10-Q for the quarterly period ended June 30, 1997 and
incorporated herein by reference.
3.19 Certificate of Determination for Equity Stock, Series AA. Filed with
Registrant's Form 10-Q for the quarterly period ended September 30,
1999 and incorporated herein by reference.
3.20 Certificate Decreasing Shares Constituting Equity Stock, Series A.
Filed with Registrant's Form 10-Q for the quarterly period ended
September 30, 1999 and incorporated herein by reference.
3.21 Certificate of Determination for Equity Stock, Series A. Filed with
Registrant's Form 10-Q for the quarterly period ended September 30,
1999 and incorporated herein by reference.
3.22 Certification of Determination for 8% Cumulative Preferred Stock,
Series J. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8% Cumulative Preferred Stock, Series J and incorporated herein by
reference.
3.23 Certificate of Correction of Certificate of Determination for the 8.25%
Convertible Preferred Stock. Filed with Registrant's Registration
Statement No. 333-61045 and incorporated herein by reference.
3.24 Certification of Determination for 8-1/4% Cumulative Preferred Stock,
Series K. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-1/4% Cumulative Preferred Stock, Series K and incorporated herein
by reference.
3.25 Certificate of Determination for 8-1/4% Cumulative Preferred Stock,
Series L. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-1/4% Cumulative Preferred Stock, Series L and incorporated herein
by reference.
3.26 Certificate of Determination for 8.75% Cumulative Preferred Stock,
Series M. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1000 of a Share
of 8.75% Cumulative Preferred Stock, Series M and incorporated herein
by reference.
3.27 Certificate of Determination for Equity Stock, Series AAA. Filed with
Registrant's Current Report on Form 8-K dated November 15, 1999 and
incorporated herein by reference.
3.28 Certification of Determination for 9.5% Cumulative Preferred Stock,
Series N. Filed with Registrant's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by reference.
30
<PAGE>
3.29 Certificate of Determination for 9.125% Cumulative Preferred Stock,
Series O. Filed herewith.
3.30 Bylaws, as amended. Filed with Registrant's Registration Statement No.
33-64971 and incorporated herein by reference.
3.31 Amendment to Bylaws adopted on May 9, 1996. Filed with Registrant's
Registration Statement No. 333-03749 and incorporated herein by
reference.
3.32 Amendment to Bylaws adopted on June 26, 1997. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.33 Amendment to Bylaws adopted on January 6, 1998. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.34 Amendment to Bylaws adopted on February 10, 1998. Filed with
Registrant's Current Report on Form 8-K dated February 10, 1998 and
incorporated herein by reference.
3.35 Amendment to Bylaws adopted on March 4, 1999. Filed with Registrant's
Current Report on Form 8-K dated March 4, 1999 and incorporated herein
by reference.
3.36 Amendment to Bylaws adopted on May 6, 1999. Filed with Registrant's
Form 10-Q for the quarterly period ended March 31, 1999 and
incorporated herein by reference.
10.1 Second Amended and Restated Management Agreement by and among
Registrant and the entities listed therein dated as of November 16,
1995. Filed with PS Partners, Ltd.'s Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
10.2 Amended Management Agreement between Registrant and Public Storage
Commercial Properties Group, Inc. dated as of February 21, 1995. Filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
10.3 Loan Agreement between Registrant and Aetna Life Insurance Company
dated as of July 11, 1988. Filed with Registrant's Current Report on
Form 8-K dated July 14, 1988 and incorporated herein by reference.
10.4 Amendment to Loan Agreement between Registrant and Aetna Life Insurance
Company dated as of September 1, 1993. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference.
10.5 Second Amended and Restated Credit Agreement by and among Registrant,
Wells Fargo Bank, National Association, as agent, and the financial
institutions party thereto dated as of February 25, 1997. Filed with
Registrant's Registration Statement No. 333-22665 and incorporated
herein by reference.
10.6 Note Assumption and Exchange Agreement by and among Public Storage
Management, Inc., Public Storage, Inc., Registrant and the holders of
the notes dated as of November 13, 1995. Filed with Registrant's
Registration Statement No. 33-64971 and incorporated herein by
reference.
10.7 Registrant's 1990 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10.8 Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference.
31
<PAGE>
10.9 Registrant's 1996 Stock Option and Incentive Plan. Filed with
Registrant's Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference.
10.10 Deposit Agreement dated as of December 13, 1995, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-7/8
Cumulative Preferred Stock, Series G and incorporated herein by
reference.
10.11 Deposit Agreement dated as of January 25, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8.45%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
10.12 Employment Agreement between Registrant and B. Wayne Hughes dated as of
November 16, 1995. Filed with Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference.
10.13 Deposit Agreement dated as of November 1, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-5/8% Cumulative Preferred Stock, Series I. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-5/8%
Cumulative Preferred Stock, Series I and incorporated herein by
reference.
10.14 Limited Partnership Agreement of PSAF Development Partners, L. P.
between PSAF Development, Inc. and the Limited Partner dated as of
April 10, 1997. Filed with Registrant's Form 10-Q for the quarterly
period ended March 31, 1997 and incorporated herein by reference.
10.15 Deposit Agreement dated as of August 28, 1997 among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8% Cumulative Preferred Stock, Series J. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative
Preferred Stock, Series J and incorporated herein by reference.
10.16 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties XX, Inc. dated as of December 13, 1997. Filed with
Registrant's Registration Statement No. 333-49247 and incorporated
herein by reference.
10.17 Agreement of Limited Partnership of PS Business Parks, L. P. dated as
of March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998 and
incorporated herein by reference.
10.18 Deposit Agreement dated as of January 19, 1999 among Registrant,
BankBoston, N. A. and the holders of the depositary receipts evidencing
the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
Cumulative Preferred Stock, Series K. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series K and incorporated herein by reference.
10.19 Agreement and Plan of Merger among Storage Trust Realty, Registrant and
Newco Merger Subsidiary, Inc. dated as of November 12, 1998. Filed with
Registrant's Registration Statement No. 333-68543 and incorporated
herein by reference.
32
<PAGE>
10.20 Amendment No. 1 to Agreement and Plan of Merger among Storage Trust
Realty, Registrant, Newco Merger Subsidiary, Inc. and STR Merger
Subsidiary, Inc. dated as of January 19, 1999. Filed with Registrant's
Registration Statement No. 333-68543 and incorporated herein by
reference.
10.21 Amended and Restated Agreement of Limited Partnership of Storage Trust
Properties, L. P., dated as of March 12, 1999. Filed with Registrant's
Form 10-Q for the quarterly period ended June 30, 1999 and incorporated
herein by reference.
10.22 Storage Trust Realty 1994 Share Incentive Plan. Filed with Storage
Trust Realty's Annual Report on Form 10-K for the year ended December
31, 1997 and incorporated herein by reference.
10.23 Amended and Restated Storage Trust Realty Retention Bonus Plan
effective as of November 12, 1998. Filed with Registrant's Registration
Statement No. 333-68543 and incorporated herein by reference.
10.24 Deposit Agreement dated as of March 10, 1999 among Registrant, Bank
Boston, N.A. and the holders of the depositary receipts evidencing the
Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
Cumulative Preferred Stock, Series L. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series L and incorporated herein by reference.
10.25 Note Purchase Agreement and Guaranty Agreement with respect to
$100,000,000 of Senior Notes of Storage Trust Properties, L.P. Filed
with Storage Trust Realty's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
10.26 Deposit Agreement dated as of August 17, 1999 among Registrant, Bank
Boston, N.A. and the holders of the depositary receipts evidencing the
Depositary Shares Each Representing 1/1,000 of a Share of 8.75%
Cumulative Preferred Stock, Series M. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.75% Cumulative Preferred Stock,
Series M and incorporated herein by reference.
10.27 Limited Partnership Agreement of PSAC Development Partners, L.P. among
PS Texas Holdings, Ltd., PS Pennsylvania Trust and PSAC Storage
Investors, L.L.C. dated as November 15, 1999. Filed with Registrant's
Current Report on Form 8-K dated November 15, 1999 and incorporated
herein by reference.
10.28 Agreement of Limited Liability Company of PSAC Storage Investors,
L.L.C. dated as of November 15, 1999. Filed with Registrant's Current
Report on Form 8-K dated November 15, 1999 and incorporated herein by
reference.
10.29 Deposit Agreement dated as of January 14, 2000 among Registrant,
BankBoston, N.A. and the holders of the depositary receipts evidencing
the Depositary Shares Each Representing 1/1,000 of a Share of Equity
Stock, Series A. Filed with Registrant's Form 8-A/A Registration
Statement relating to the Depositary Shares Each Representing 1/1,000
of a Share of Equity Stock, Series A and incorporated herein by
reference.
10.30 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. among PS Texas Holdings, Ltd. and the
Limited Partners dated as of March 29, 2000. Filed with Registrant's
Annual Report on Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference.
11. Statement re: Computation of Earnings per Share. Filed herewith.
12. Statement re: Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
33
<PAGE>
27. Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
The Company filed a Current Report on form 8-K dated January 13, 2000
(filed January 14, 2000), pursuant to Item 5, in connection with the
Company's public offering of depositary shares each representing 1/1000
of a share of Equity Stock, Series A in January 2000.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 15, 2000
PUBLIC STORAGE, INC.
BY: /s/ John Reyes
John Reyes
Senior Vice President and Chief Financial Officer
(Principal financial officer and duly authorized
officer)
35
Exhibit 3.29
CERTIFICATE OF DETERMINATION OF PREFERENCES
OF
9.125% CUMULATIVE PREFERRED STOCK, SERIES O
OF
PUBLIC STORAGE, INC.
[As Filed in the Office of the Secretary of State of the State of California
on March 29, 2000]
The undersigned, David Goldberg and Sarah Hass, Senior Vice
President and Secretary, respectively, of PUBLIC STORAGE, INC., a California
corporation, do hereby certify:
FIRST: The Restated Articles of Incorporation of the
Corporation authorize the issuance of 50,000,000 shares of stock designated
"preferred shares," issuable from time to time in one or more series, and
authorize the Board of Directors to fix the number of shares constituting any
such series, and to determine or alter the dividend rights, dividend rate,
conversion rights, voting rights, right and terms of redemption (including,
without limitation, sinking fund provisions), the redemption price or prices and
the liquidation preference of any wholly unissued series of such preferred
shares, and the number of shares constituting any such series.
SECOND: The Board of Directors of the Corporation did duly
adopt the resolutions attached hereto as Exhibit A and incorporated herein by
reference authorizing and providing for the creation of a series of preferred
shares to be known as "9.125% Cumulative Preferred Stock, Series O" consisting
of 3,000 shares, none of the shares of such series having been issued.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
IN WITNESS WHEREOF, the undersigned have executed this
certificate this 29th day of March, 2000.
/S/ DAVID GOLDBERG
---------------------
David Goldberg
Senior Vice President
/S/ SARAH HASS
---------------------
Sarah Hass
Secretary
<PAGE>
EXHIBIT A
RESOLUTION OF THE BOARD OF DIRECTORS
OF PUBLIC STORAGE, INC.
ESTABLISHING A SERIES OF 9.125% CUMULATIVE
PREFERRED STOCK, SERIES O
RESOLVED that pursuant to the authority conferred upon the
Board of Directors by Article III of the Restated Articles of Incorporation of
this Corporation, there is hereby established a series of the authorized
preferred shares of this Corporation having a par value of $.01 per share, which
series shall be designated "9.125% Cumulative Preferred Stock, Series O," shall
consist of 3,000 shares and shall have the following rights, preferences and
privileges:
(a) Dividend Rights.
---------------
(1) Dividends shall be payable in cash on each share of this
Series when, as and if declared by the Board of Directors, out of funds legally
available therefor (i) for the period (the "INITIAL DIVIDEND PERIOD") from and
including the date of issuance of such share (the "ISSUE DATE") to but excluding
the first day of the first calendar quarter occurring after the Issue Date and
(ii) for each quarterly dividend period thereafter (the Initial Dividend Period
and each quarterly dividend period being hereinafter individually referred to as
a "DIVIDEND PERIOD" and collectively referred to as "DIVIDEND PERIODS"), which
quarterly Dividend Periods shall be in four equal amounts and shall commence on
January 1, April 1, July 1 and October 1 in each year (each, a "DIVIDEND PERIOD
COMMENCEMENT DATE"), commencing on the first day of the first calendar quarter
occurring after the Issue Date, and shall end on and include the day next
preceding the next Dividend Period Commencement Date, at a rate per annum equal
to 9.125% of the $25,000 per share stated value thereof (the "DIVIDEND RATE").
Dividends on each share of this Series shall be cumulative from the Issue Date
and shall be payable (i) quarterly, in arrears, on or before the last day of
each Dividend Period and (ii) in the event of redemption, on the applicable
redemption date; PROVIDED, that if any such day shall be a Saturday, Sunday, or
a day on which banking institutions in the State of New York or the State of
California are authorized or obligated by law to close, or a day which is or is
declared a national or a New York or California state holiday (any of the
foregoing a "NON-BUSINESS DAY"), then the payment date shall be the next
succeeding day which is not a Non-Business Day. Each such dividend shall be paid
to the holders of record of shares of this Series as they appear on the stock
register of the Corporation on such record date, not more than 45 days nor less
than 15 days preceding the payment date thereof, as shall be fixed by the Board
of Directors. Dividends on account of arrears for any past Dividend Periods may
be declared and paid at any time, without reference to any regular dividend
payment date, to holders of record on such date, not more than 45 days nor less
than 15 days preceding the payment date thereof, as may be fixed by the Board of
Directors. After full cumulative dividends on this Series have been paid or
declared and funds therefor irrevocably deposited in trust for immediate
payment, including for the then current Dividend Period, the holders of shares
of this Series will not be entitled to any further dividends with respect to
that Dividend Period.
(2) Dividends payable on shares of this Series for any period
greater or less than a full Dividend Period, including the Initial Dividend
Period, shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
(3) The Corporation shall not declare or pay or set apart for
payment any dividends on any series of preferred shares ranking, as to
dividends, on a parity with or junior to the shares of this Series as to
dividends or upon liquidation unless full cumulative dividends with respect to
shares of this Series have been or contemporaneously are declared and paid, or
declared and a sum sufficient for payment thereof irrevocably deposited in trust
for immediate payment, for all Dividend Periods terminating on or prior to the
date of payment of any such dividends on such other series of preferred shares.
When dividends are not paid in full upon the shares of this Series and any other
series of preferred shares ranking on a parity therewith as to dividends
2
<PAGE>
(including, without limitation, the shares of the Corporation's 10% Cumulative
Preferred Stock, Series A (the "SERIES A PREFERRED STOCK"), 9.20% Cumulative
Preferred Stock, Series B (the "SERIES B PREFERRED STOCK"), 9.50% Cumulative
Preferred Stock, Series D (the "SERIES D PREFERRED STOCK"), 10% Cumulative
Preferred Stock, Series E (the "SERIES E PREFERRED STOCK"), 9.75% Cumulative
Preferred Stock, Series F (the "SERIES F PREFERRED STOCK"), 8-7/8% Cumulative
Preferred Stock, Series G (the "SERIES G PREFERRED STOCK"), 8.45% Cumulative
Preferred Stock, Series H (the "SERIES H PREFERRED STOCK"), 8-5/8% Cumulative
Preferred Stock, Series I (the "SERIES I PREFERRED STOCK"), 8% Cumulative
Preferred Stock, Series J (the "SERIES J PREFERRED STOCK"), 8 1/4% Cumulative
Preferred Stock, Series K (the "SERIES K PREFERRED STOCK"), 8 1/4% Cumulative
Preferred Stock, Series L (the "SERIES L PREFERRED STOCK"), 8.75% Cumulative
Preferred Stock, Series M (the "SERIES M PREFERRED STOCK"), 9.5% Cumulative
Preferred Stock, Series N (the "SERIES N PREFERRED STOCK") and Adjustable Rate
Cumulative Preferred Stock, Series C (the "ADJUSTABLE RATE PREFERRED STOCK")),
all dividends declared upon shares of this Series and any other series of
preferred shares ranking on a parity therewith as to dividends shall be declared
pro rata so that the amount of dividends declared per share on the shares of
this Series and such other series of preferred shares shall in all cases bear to
each other that same ratio that the accumulated dividends per share on the
shares of this Series and such other series of preferred shares bear to each
other. Except as provided in the preceding sentence, unless full cumulative
dividends on the shares of this Series have been paid for all past Dividend
Periods, no dividends (other than in shares of the Corporation's common stock,
par value $.10 per share (together with any other shares of capital stock of the
Corporation into which such shares shall be reclassified or changed ("COMMON
SHARES"), or another stock ranking junior to the shares of this Series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be made upon the Common Shares or on
any other stock of the Corporation ranking junior to or on a parity with the
shares of this Series as to dividends or upon liquidation. Unless full
cumulative dividends on the shares of this Series have been paid for all past
Dividend Periods, no Common Shares or any other stock of the Corporation ranking
junior to or on a parity with the shares of this Series as to dividends or upon
liquidation shall be redeemed, purchased, or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation or any
subsidiary, except by conversion into or exchange for stock of the Corporation
ranking junior to the shares of this Series as to dividends and upon
liquidation.
(b) Liquidation.
-----------
In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the holders of shares of this
Series are entitled to receive out of the assets of the Corporation available
for distribution to shareholders, before any distribution of assets is made to
holders of Common Shares or any other class or series of shares ranking junior
to the shares of this Series upon liquidation, liquidating distributions in the
amount of $25,000 per share plus all accumulated and unpaid dividends (whether
or not earned or declared) for the then current and all past Dividend Periods.
If, upon any voluntary or involuntary liquidation, dissolution, or winding up of
the Corporation the amounts payable with respect to the shares of this Series
and any other shares of the Corporation ranking as to any such distribution on a
parity with the shares of this Series are not paid in full, the holders of
shares of this Series and of such other shares (including, without limitation,
the shares of Series A, Series B, Series D, Series E, Series F, Series G, Series
H, Series I, Series J, Series K, Series L, Series M and Series N Preferred Stock
and Adjustable Rate Preferred Stock) will share ratably in any such distribution
of assets of the Corporation in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of shares of
this Series will not be entitled to any further participation in any
distribution of assets by the Corporation.
(1) Written notice of any such liquidation, dissolution or
winding up of the Corporation, stating the payment date or dates when, and the
place or places where the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage pre-paid, not less than 30
nor more than 60 days prior to the payment date stated therein, to each record
holder of the shares of this Series at the respective addresses of such holders
as the same shall appear on the stock transfer records of the Corporation.
3
<PAGE>
(2) For purposes of liquidation rights, a reorganization (as
defined in Section 181 of the California Corporations Code) or consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation shall be
deemed not to be a liquidation, dissolution or winding up of the Corporation.
(c) Redemption.
----------
(1) Except as provided in clause (9) below, the shares of this
Series are not redeemable prior to March 29, 2005. On and after such date, the
shares of this Series are redeemable at the option of the Corporation, by
resolution of the Board of Directors, in whole or in part, from time to time
upon not less than 30 nor more than 60 days' notice, at a cash redemption price
of $25,000 per share plus all accumulated and unpaid dividends (whether or not
earned or declared) to the date of redemption.
(2) If fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed will be determined by
the Board of Directors, and such shares shall be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
by such holders (with adjustments to avoid redemption of fractional shares).
(3) Notwithstanding the foregoing, if any dividends, including
any accumulation, on the shares of this Series are in arrears, no shares of this
Series shall be redeemed unless all outstanding shares of this Series are
simultaneously redeemed, and the Corporation shall not purchase or otherwise
acquire, directly or indirectly, any shares of this Series; PROVIDED, however,
that the foregoing shall not prevent the purchase or acquisition of shares of
this Series pursuant to a purchase or exchange offer provided such offer is made
on the same terms to all holders of shares of this Series.
(4) Immediately prior to any redemption of shares of this
Series, the Corporation shall pay, in cash, any accumulated and unpaid dividends
through the redemption date, unless a redemption date falls after a dividend
payment record date and prior to the corresponding dividend payment date, in
which case each holder of shares of this Series at the close of business on such
dividend payment record date shall be entitled to the dividend payable on such
shares on the corresponding dividend payment date notwithstanding the redemption
of such shares before such dividend payment date. Except as expressly provided
herein above, the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on shares of this Series called for
redemption.
(5) Notice of redemption shall be given by publication in a
newspaper of general circulation in the County of Los Angeles and The City of
New York, such publication to be made once a week for two successive weeks,
commencing not less than 30 nor more than 60 days prior to the date fixed for
redemption thereof. A similar notice will be mailed by the Company by first
class mail, postage pre-paid, to each record holder of the shares of this Series
to be redeemed, not less than 30 nor more than 60 days prior to such redemption
date, to the respective addresses of such holders as the same shall appear on
the stock transfer records of the Corporation. Each notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to be redeemed; (iii)
the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date. If fewer than all the shares of this Series held by any holder
are to be redeemed, the notice mailed to such holder shall also specify the
number of shares of this Series to be redeemed from such holder.
(6) In order to facilitate the redemption of shares of this
Series, the Board of Directors may fix a record date for the determination of
the shares to be redeemed, such record date to be not less than 30 nor more than
60 days prior to the date fixed for such redemption.
(7) Notice having been given as provided above, from and after
the date fixed for the redemption of shares of this Series by the Corporation
(unless the Corporation shall fail to make available the money necessary to
effect such redemption), the holders of shares selected for redemption shall
cease to be shareholders with respect to such shares and shall have no interest
in or claim against the Corporation by virtue thereof and shall have no voting
4
<PAGE>
or other rights with respect to such shares, except the right to receive the
moneys payable upon such redemption from the Corporation, less any required tax
withholding amount, without interest thereon, upon surrender (and endorsement or
assignment of transfer, if required by the Corporation and so stated in the
notice) of their certificates, and the shares represented thereby shall no
longer be deemed to be outstanding. If fewer than all the shares represented by
a certificate are redeemed, a new certificate shall be issued, without cost to
the holder thereof, representing the unredeemed shares. The Corporation may, at
its option, at any time after a notice of redemption has been given, deposit the
redemption price for the shares of this Series designated for redemption and not
yet redeemed, plus any accumulated and unpaid dividends thereon to the date
fixed for redemption, with the transfer agent or agents for this Series, as a
trust fund for the benefit of the holders of the shares of this Series
designated for redemption, together with irrevocable instructions and authority
to such transfer agent or agents that such funds be delivered upon redemption of
such shares and to pay, on and after the date fixed for redemption or prior
thereto, the redemption price of the shares to their respective holders upon the
surrender of their share certificates. From and after the making of such
deposit, the holders of the shares designated for redemption shall cease to be
shareholders with respect to such shares and shall have no interest in or claim
against the Corporation by virtue thereof and shall have no voting or other
rights with respect to such shares, except the right to receive from such trust
fund the moneys payable upon such redemption, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares represented thereby shall no longer be deemed to be
outstanding. Any balance of such moneys remaining unclaimed at the end of the
five-year period commencing on the date fixed for redemption shall be repaid to
the Corporation upon its request expressed in a resolution of its Board of
Directors.
(8) Any shares of this Series that shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued preferred shares, without designation as to series until such shares
are once more designated as part of a particular series by the Board of
Directors.
(9) If the Board of Directors of the Corporation shall, at any
time and in good faith, be of the opinion that ownership of securities of the
Corporation has or may become concentrated to an extent that may prevent the
Corporation from qualifying as a real estate investment trust under the REIT
Provisions of the Internal Revenue Code, then the Board of Directors shall have
the power, by lot or other means deemed equitable by them to prevent the
transfer of and/or to call for redemption a number of shares of this Series
sufficient, in the opinion of the Board of Directors, to maintain or bring the
direct or indirect ownership thereof into conformity with the requirements of
such a real estate investment trust under the REIT Provisions of the Internal
Revenue Code. The redemption price to be paid for shares of this Series so
called for redemption, on the date fixed for redemption, shall be the average of
the highest bid and the lowest asked quotations on the last business day prior
to the redemption date as reported by the National Quotation Bureau,
Incorporated or a similar organization selected from time to time by the
Corporation or if there be no such bid and asked quotations, as determined by
the Board of Directors in good faith; provided that if interests in shares of
this Series are represented by depositary shares, then the redemption price
shall be determined in accordance with the foregoing, but with respect to one
depositary share, multiplied by the number of depositary shares that together
represent an interest in one share of this Series. From and after the date fixed
for redemption by the Board of Directors, the holder of any shares of this
Series so called for redemption shall cease to be entitled to any distributions,
voting rights and other benefits with respect to such shares of this Series,
other than the right to payment of the redemption price determined as aforesaid.
"REIT Provisions of the Internal Revenue Code" shall mean Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. In order to exercise the
redemption option set forth in this clause (9), with respect to the shares of
this Series, the Corporation shall give notice of redemption by publication in a
newspaper of general circulation in the County of Los Angeles and The City of
New York, such publication to be made once a week for two successive weeks,
commencing not less than 30 nor more than 60 days prior to the date fixed for
redemption. A similar notice will be mailed by the Corporation by first class
mail, postage pre-paid, to each record holder of the shares of this Series to be
redeemed, not less than 30 nor more than 60 days prior to such redemption date,
to the respective addresses of such holders as the same shall appear on the
stock transfer records of the Corporation. Each notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to be redeemed; (iii)
the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date. If fewer than all the shares of this Series held by any holder
5
<PAGE>
are to be redeemed, the notice mailed to such holder shall also specify the
number of shares of this Series to be redeemed from such holder.
(d) Maintenance of Debt Ratio. Without the affirmative vote or
the written consent of the holders of a majority of the shares of this Series,
the Corporation will not take any action that would result in a ratio of Debt to
Assets (the "Debt Ratio") in excess of 50%.
"DEBT" means, as of any date of determination, all
liabilities that should, in accordance with GAAP, be reflected as a liability on
the consolidated balance sheet of the Corporation as of such date of
determination; provided, however, that "Debt" shall not include liabilities
included in the consolidated balance sheet under the headings "accrued and other
liabilities" or "minority interest" to the extent that the inclusion of such
liabilities under such headings is consistent with the Corporation's past
practice.
"ASSETS" means, as of any date of determination, all assets
that should, in accordance with GAAP, be reflected as an asset on the
consolidated balance sheet of the Corporation as of such date of determination.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America from time to time, consistently applied.
(e) VOTING RIGHTS. The shares of this Series shall not have
any voting powers either general or special, except as required by law, except
as set forth in Section (d) hereof and except that:
(1) (A) If the Corporation shall fail to pay full cumulative
dividends on the shares of this Series or any other of its preferred shares for
six quarterly dividend payment periods, whether or not consecutive (a "DIVIDEND
DEFAULT"), the holders of all outstanding preferred shares, voting as a single
class without regard to series, will be entitled to elect two Directors until
full cumulative dividends for all past dividend payment periods on all preferred
shares have been paid or declared and funds therefor set apart for payment. Such
right to vote separately as a class to elect Directors shall, when vested, be
subject, always, to the same provisions for the vesting of such right to elect
Directors separately as a class in the case of future Dividend Defaults. At any
time when such right to elect Directors separately as a class shall have so
vested, the Corporation may, and upon the written request of the holders of
record of not less than 20% of the total number of preferred shares of the
Corporation then outstanding shall, call a special meeting of stockholders for
the election of Directors. In the case of such a written request, such special
meeting shall be held within 90 days after the delivery of such request and, in
either case, at the place and upon the notice provided by law and in the Bylaws
of the Corporation, provided that the Corporation shall not be required to call
such a special meeting if such request is received less than 120 days before the
date fixed for the next ensuing Annual Meeting of Shareholders of the
Corporation and the holders of all classes of outstanding preferred shares are
afforded the opportunity to elect such Directors (or fill any vacancy) at such
Annual Meeting of Shareholders. Directors elected as aforesaid shall serve until
the next Annual Meeting of Shareholders of the Corporation or until their
respective successors shall be elected and qualified. If, prior to the end of
the term of any Director elected as aforesaid, a vacancy in the office of such
Director shall occur during the continuance of a Dividend Default by reason of
death, resignation, or disability, such vacancy shall be filled for the
unexpired term by the appointment of a new Director for the unexpired term of
such former Director, such appointment to be made by the remaining Director
elected as aforesaid.
(B) In addition to the right to elect Directors set forth
in clause (A) above, if, without the affirmative vote or the written consent of
the holders of a majority of the shares of this Series, on the last day of two
consecutive fiscal quarters of the Corporation, the Debt Ratio exceeds 50% (a
"DEBT RATIO DEFAULT"), the holders of all outstanding shares of this Series,
voting as a single class, will be entitled to elect two Directors until the Debt
Ratio as of the last day of a fiscal quarter of the Corporation is reduced to
50% or less. Such right to vote separately as a class to elect Directors shall,
when vested, be subject, always, to the same provisions for the vesting of such
right to elect Directors separately as a class in the case of future Debt Ratio
Defaults. At any time when such right to elect Directors separately as a class
shall have so vested, the Corporation may, and upon the written request of the
holders of record of not less than 20% of the total number of shares of this
6
<PAGE>
Series then outstanding shall, call a special meeting of stockholders for the
election of Directors. In the case of such a written request, such special
meeting shall be held within 90 days after the delivery of such request and, in
either case, at the place and upon the notice provided by law and in the Bylaws
of the Corporation, provided that the corporation shall not be required to call
such a special meeting if such request is received less than 120 days before the
date fixed for the next ensuing Annual Meeting of Shareholders of the
Corporation and the holders of shares of this Series are afforded the
opportunity to elect such Directors (or fill any vacancy) at such Annual Meeting
of Shareholders. Directors elected as aforesaid shall serve until the next
Annual Meeting of Shareholders of the Corporation or until their respective
successors shall be elected and qualified. If, prior to the end of the term of
any Director elected as aforesaid, a vacancy in the office of such Director
shall occur during the continuance of a Debt Ratio Default by reason of death,
resignation, or disability, such vacancy shall be filled for the unexpired term
by the appointment of a new Director for the unexpired term of such former
Director, such appointment to be made by the remaining Director elected as
aforesaid.
(2) The affirmative vote or consent of the holders of at least
662/3% of the outstanding shares of this Series, voting separately as a class,
will be required for any amendment to the Articles of Incorporation of the
Corporation that will adversely alter or change the powers, preferences,
privileges or rights of the shares of this Series, except as set forth below.
The affirmative vote or consent of the holders of (i) at least 50% of the
outstanding shares of this Series, voting separately as a class, and (ii) at
least 662/3% of the outstanding shares of this Series and any other series of
preferred shares ranking on a parity with this Series as to dividends and upon
liquidation (including, without limitation, the shares of Series A, Series B,
Series D, Series E, Series F, Series G, Series H, Series I, Series J, Series K,
Series L, Series M and Series N Preferred Stock and Adjustable Rate Preferred
Stock), voting as a single class without regard to series, will be required to
issue, authorize or increase the authorized amount of any class or series of
shares ranking prior to this Series as to dividends or upon liquidation or to
issue or authorize any obligation or security convertible into or evidencing a
right to purchase any such security, but the Articles of Incorporation may be
amended to increase the number of authorized preferred shares ranking on a
parity with or junior to this Series or to create another class of preferred
shares ranking on a parity with or junior to this Series without the vote of the
holders of outstanding shares of this Series.
(3) The affirmative vote or consent of the holders of a
majority of the outstanding shares of this Series, voting separately as a class,
will be required for any amendment or repeal of the following provisions of the
Bylaws of the Corporation, which would be adverse to the interests of the
holders of shares of this Series, and for any other changes to the Bylaws of the
Corporation that affect these provisions in a manner which would be adverse to
the interests of the holders of shares of this Series: Article IV, Section 2
(relating to the Corporation's permissible Asset Coverage), Article VIII,
Section 2(g) and (h) (relating to the Corporation's investment policy) and each
of the defined terms used in any of the foregoing provisions.
(4) Except to the extent required pursuant to clause (3)
above, nothing herein shall be taken to require a class vote or consent in
connection with the authorization, designation, increase or issuance of any
shares of any class or series (including additional preferred shares of any
series) that rank junior to or on a parity with this Series as to dividends and
liquidation rights or in connection with the authorization, designation,
increase or issuance of any bonds, mortgages, debentures or other debt
obligations of the Corporation.
(5) The right to elect Directors set forth in clause (1)(B)
above is not intended to be the exclusive remedy of holders of the shares of
this Series in the event of a Debt Ratio Default.
(f) CONVERSION. The shares of this Series are not convertible
into shares of any other class or series of the capital stock of the
Corporation.
7
PUBLIC STORAGE, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------------
EARNINGS PER SHARE: 2000 1999
- ------------------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Net income ................................................................... $ 72,561,000 $ 61,842,000
Less: Preferred Stock dividends:
10% Cumulative Preferred Stock, Series A .................................. (1,140,000) (1,140,000)
9.20% Cumulative Preferred Stock, Series B ................................ (1,372,000) (1,372,000)
Adjustable Rate Preferred Stock, Series C ................................. (517,000) (506,000)
9.50% Cumulative Preferred Stock, Series D ................................ (713,000) (713,000)
10.0% Cumulative Preferred Stock, Series E ................................ (1,372,000) (1,372,000)
9.75% Cumulative Preferred Stock, Series F ................................ (1,401,000) (1,401,000)
8.875% Cumulative Preferred Stock, Series G ............................... (3,828,000) (3,828,000)
8.45% Cumulative Preferred Stock, Series H ................................ (3,565,000) (3,565,000)
8.625% Cumulative Preferred Stock, Series I ............................... (2,156,000) (2,156,000)
8.00% Cumulative Preferred Stock, Series J ................................ (3,000,000) (3,000,000)
8.25% Cumulative Preferred Stock, Series K ................................ (2,372,000) (1,924,000)
8.25% Cumulative Preferred Stock, Series L ................................ (2,372,000) (553,000)
8.75% Cumulative Preferred Stock, Series M ................................ (1,230,000) --
--------------- ---------------
. ............................................................................ $ 47,523,000 $ 40,312,000
=============== ===============
Allocation of net income allocable to common shareholders to classes:
Net income allocable to shareholders of the Equity Stock, Series A ...... $ 2,258,000 $ --
Net income allocable to shareholders of common stock .................... 45,265,000 40,312,000
--------------- ---------------
$ 47,523,000 $ 40,312,000
=============== ===============
Weighted average common shares outstanding:
Basic - weighted average common shares outstanding ........................ 132,781,000 118,624,000
Net effect of dilutive stock options - based on treasury stock method using
average market price .................................................... 121,000 390,000
--------------- ---------------
Diluted weighted average common shares outstanding (1) .................... 132,902,000 119,014,000
=============== ===============
Basic earnings per common share .............................................. $ 0.34 $ 0.34
=============== ===============
Diluted earnings per common share (1) ........................................ $ 0.34 $ 0.34
=============== ===============
</TABLE>
1. Diluted net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). Commencing January
1, 2000, the 7,000,000 Class B common shares outstanding began to
participate in distributions of our earnings. Distributions per share of
Class B common stock are equal to 97% of the per share distribution paid to
our regular common shares. As a result of this participation in
distribution of earnings, for purposes of computing net income per common
share, we began to include 6,790,000 (7,000,000 x 97%) Class B common
shares in the weighted average common equivalent shares for the three
months ended March 31, 2000. Weighted average diluted shares for the three
months ended March 31, 1999 does not include any shares with respect to the
Class B common stock as these shares were not participating in
distributions of our earnings prior to January 1, 2000.
Exhibit 11
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------------
EARNINGS PER SHARE: 2000 1999
- ---------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Net income allocable to common shareholders for purposes of determining Diluted
Earnings per Share, assuming conversion of anti-dilutive securities........... $ 45,265,000 $ 40,312,000
=============== ===============
Weighted average common shares for purposes of computation of Diluted Earnings per
Share, assuming conversion of anti-dilutive securities........................ 132,902,000 119,014,000
=============== ===============
Diluted Earnings per Common Share, assuming conversion of anti-dilutive securities
(1)........................................................................... $ 0.34 $ 0.34
=============== ===============
</TABLE>
(1) Such amounts are anti-dilutive and are not presented in our consolidated
financial statements.
Diluted net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). Commencing January
1, 2000, the 7,000,000 Class B common shares outstanding began to
participate in distributions of our earnings. Distributions per share of
Class B common stock are equal to 97% of the per share distribution paid to
our regular common shares. As a result of this participation in
distribution of earnings, for purposes of computing net income per common
share, we began to include 6,790,000 (7,000,000 x 97%) Class B common
shares in the weighted average common equivalent shares for the three
months ended March 31, 2000. Weighted average diluted shares for the three
months ended March 31, 1999 does not include any shares with respect to the
Class B common stock as these shares were not participating in
distributions of our earnings prior to January 1, 2000.
Exhibit 11
PUBLIC STORAGE, INC.
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income................................................ $ 72,561 $ 61,842
Add: Minority interest in income....................... 4,389 3,353
Less: Minority interests in income which do not have fixed
charges.............................................. (2,896) (3,103)
------------ ------------
Income from continuing operations......................... 74,054 62,092
Interest expense....................................... 1,406 1,204
------------ ------------
Total Earnings Available to Cover Fixed Charges........... $ 75,460 $ 63,296
============ ============
Total Fixed Charges - Interest expense (including capitalized
interest).............................................. $ 3,517 $ 2,162
============ ============
Preferred Stock dividends................................. $ 25,038 $ 21,530
Preferred OP unit distributions........................... 925 -
------------ ------------
Total Preferred Distributions............................. $ 25,963 $ 21,530
============ ============
Total Combined Fixed Charges and Preferred
distributions.......................................... $ 29,480 $ 23,692
============ ============
Ratio of Earnings to Fixed Charges........................ 21.46x 29.28x
============ ============
Ratio of Earnings to Combined Fixed Charges and Preferred
distributions......................................... 2.56x 2.67x
============ ============
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(Amounts in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Net income................................................ $ 287,885 $ 227,019 $ 178,649 $ 153,549 $ 70,386
Add: Minority interest in income....................... 16,006 20,290 11,684 9,363 7,137
Less: Minority interests in income which do not have fixed
charges.............................................. (13,362) (15,853) (10,375) (8,273) (4,700)
------------ ------------ ------------ ------------ ------------
Income from continuing operations......................... 290,529 231,456 179,958 154,639 72,823
Interest expense....................................... 7,971 4,507 6,792 8,482 8,508
------------ ------------ ------------ ------------ ------------
Total Earnings Available to Cover Fixed Charges........... $ 298,500 $ 235,963 $ 186,750 $ 163,121 $ 81,331
============ ============ ============ ============ ============
Total Fixed Charges - Interest expense (including capitalized
interest).............................................. $ 12,480 $ 7,988 $ 9,220 $ 10,343 $ 8,815
============ ============ ============ ============ ============
Preferred Stock dividends................................. $ 94,793 $ 78,375 $ 88,393 $ 68,599 $ 31,124
Preferred OP unit distributions........................... - - - - -
------------ ------------ ------------ ------------ ------------
Total Preferred Distributions............................. $ 94,793 $ 78,375 $ 88,393 $ 68,599 $ 31,124
============ ============ ============ ============ ============
Total Combined Fixed Charges and Preferred
distributions.......................................... $ 107,273 $ 86,363 $ 97,613 $ 78,942 $ 39,939
============ ============ ============ ============ ============
Ratio of Earnings to Fixed Charges........................ 23.92x 29.54x 20.25x 15.77x 9.23x
============ ============ ============ ============ ============
Ratio of Earnings to Combined Fixed Charges and Preferred
distributions......................................... 2.78x 2.73x 1.91x 2.07x 2.04x
============ ============ ============ ============ ============
</TABLE>
Exhibit 12
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
----------- -----------
SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM OPERATIONS ("FFO") TO FIXED
- --------------------------------------------------------------------------------
CHARGES:
- --------
<S> <C> <C>
FFO............................................................. $ 110,685 $ 92,634
Add back minority OP unit distributions......................... 925 -
Interest expense................................................ 1,406 1,204
----------- -----------
Adjusted FFO available to cover fixed charges................... $ 113,016 $ 93,838
=========== ===========
Total Fixed Charges - Interest expense (including capitalized
interest)................................................... $ 3,517 $ 2,162
=========== ===========
Preferred Stock dividends....................................... $ 25,038 $ 21,530
Preferred OP unit distributions................................. 925 -
----------- -----------
Total Preferred Distributions................................... $ 25,963 $ 21,530
=========== ===========
Total Combined Fixed Charges and Preferred Distributions........ $ 29,480 $ 23,692
=========== ===========
Ratio of FFO to Fixed Charges................................... 32.13x 43.40x
=========== ===========
Ratio of FFO to Combined Fixed Charges and Preferred Distributions 3.83x 3.96x
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM OPERATIONS ("FFO") TO FIXED
- -------------------------------------------------------------------------------
CHARGES:
- --------
<S> <C> <C> <C> <C> <C>
FFO............................................................. $ 428,962 $ 336,363 $ 272,234 $ 224,476 $ 105,199
Add back minority OP unit distributions......................... - - - - -
Interest expense................................................ 7,971 4,507 6,792 8,482 8,508
----------- ----------- ----------- ----------- -----------
Adjusted FFO available to cover fixed charges................... $ 436,933 $ 340,870 $ 279,026 $ 232,958 $ 113,707
=========== =========== =========== =========== ===========
Total Fixed Charges - Interest expense (including capitalized
interest)................................................... $ 12,480 $ 7,988 $ 9,220 $ 10,343 $ 8,815
=========== =========== =========== =========== ===========
Preferred Stock dividends....................................... $ 94,793 $ 78,375 $ 88,393 $ 68,599 $ 31,124
Preferred OP unit distributions................................. - - - - -
----------- ----------- ----------- ----------- -----------
Total Preferred Distributions................................... $ 94,793 $ 78,375 $ 88,393 $ 68,599 $ 31,124
=========== =========== =========== =========== ===========
Total Combined Fixed Charges and Preferred Distributions........ $ 107,273 $ 86,363 $ 97,613 $ 78,942 $ 39,939
=========== =========== =========== =========== ===========
Ratio of FFO to Fixed Charges................................... 35.01x 42.67x 30.26x 22.52x 12.90x
=========== =========== =========== =========== ===========
Ratio of FFO to Combined Fixed Charges and Preferred Distributions 4.07x 3.95x 2.86x 2.95x 2.85x
=========== =========== =========== =========== ===========
</TABLE>
Exhibit 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000318380
<NAME> Public Storage, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 274,681,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 274,681,000
<PP&E> 3,856,350,000
<DEPRECIATION> (565,714,000)
<TOTAL-ASSETS> 4,492,348,000
<CURRENT-LIABILITIES> 84,135,000
<BONDS> 0
0
1,155,150,000
<COMMON> 13,243,000
<OTHER-SE> 2,588,740,000
<TOTAL-LIABILITY-AND-EQUITY> 4,492,348,000
<SALES> 0
<TOTAL-REVENUES> 176,595,000
<CGS> 0
<TOTAL-COSTS> 59,160,000
<OTHER-EXPENSES> 39,079,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,406,000
<INCOME-PRETAX> 72,561,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,561,000
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.34
</TABLE>
