Public Storage 1997 Annual Report Download - page 18

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Public Storage, Inc. 1997 Annual Report
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123 “Accounting for Stock-Based Compensation” (“Statement 123”) 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 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. The Company has elected to
adopt the disclosure requirements of Statement 123 but will continue to account for stock-based compensation under APB 25. Statement 123’s
disclosure requirements are applicable to stock-based awards granted in fiscal years beginning after December 15, 1994.
Reclassifications
Certain reclassification have been made to the consolidated financial statements for the years ended December 31, 1996 and 1995 in order
to conform with the 1997 presentation.
Note 3. Business Combinations
Mergers with affiliated REITs
During 1997, the Company completed merger transactions with six affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs which it did not previously own in exchange for cash and common stock of the Company. The aggregate acquisition cost
of these mergers is summarized as follows: Merger consideration (In thousands)
Common Pre-existing
Entity Date of merger Stock Cash investment Total
Public Storage Properties XIV, Inc. April 11, 1997 $ 34,450 $ 9,145 $ 19,977 $ 63,572
Public Storage Properties XV, Inc. April 11, 1997 29,764 8,883 18,137 56,784
Public Storage Properties XVI, Inc. June 24, 1997 41,060 10,804 22,225 74,089
Public Storage Properties XVII, Inc. June 24, 1997 34,590 15,793 25,862 76,245
Public Storage Properties XVIII, Inc. June 24, 1997 39,727 17,570 19,841 77,138
Public Storage Properties XIX, Inc. June 24, 1997 32,409 6,667 18,003 57,079
$212,000 $68,862 $124,045 $404,907
During 1996, the Company completed merger transactions with eight affiliated public REITs whereby the Company acquired all the
outstanding stock of the REITs for an aggregate cost of $356,835,000, consisting of the issuance of 8,839,181 shares of the Company’s
common stock ($204,932,000), $79,461,000 reduction of the Company’s pre-existing investment and $72,442,000 in cash.
Affiliated partnership acquisitions:
During 1997, the Company increased its ownership interest in 12 affiliated limited partnerships in which the Company is the general partner.
Prior to the acquisitions, the Company accounted for its investment in each of the 12 partnerships using the equity method. As a result of
increasing its ownership interest and obtaining control of the partnerships, the Company began to consolidate the accounts of the partnerships
in the Company’s consolidated financial statements. These transactions are summarized as follows:
Economic
Interest after Date Pre-existing
Entity Acquisition Purchased Cash investment Total
(In thousands)
PS Institutional Fund II 75% Sept. 1997 $52,124 $44,262 $ 96,386
PS Miniwarehouses Funds I-IX 95% Oct. 1997 28,244 4,582 32,826
PS Co-Investment Partnership 52% Nov. 1997 15,578 16,511 32,089
$95,946 $65,355 $161,301
During 1996, the Company increased its ownership interest and obtained control of three limited partnerships. As a result, commencing
in 1996, the Company began to consolidate the accounts of these partnerships for financial statement purposes. The aggregate amount of the
interests acquired totaled $145,270,000 consisting of the issuance of $58,955,000 of Series CC Convertible Preferred Stock, $45,235,000
reduction of the Company’s pre-existing investment and cash of $41,080,000.
Each of the above mergers with affiliated REIT’s and acquisitions of partnership interests discussed above has been accounted for as a
purchase; accordingly, allocations of the total acquisition cost to the net assets acquired were made based on the fair value of such assets and