Public Storage 1997 Annual Report Download - page 43

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Public Storage, Inc. 1997 Annual Report
Operating as a real estate investment trust (“REIT”), the Company’s ability to retain cash flow for reinvestment is restricted. In order for
the Company to maintain its favored REIT status, a substantial portion of its operating cash flow must be used to make distributions to its
shareholders (see “REIT status” below). The following table summarizes the Company’s ability to pay the minority interests’ distributions, its
dividends 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 the Company to make both scheduled and optional principal payments on debt,
pay distributions to common shareholders and for reinvestment.
For the Year Ended December 31,
(In thousands) 1997 1996 1995
Net income $178,649 $153,549 $ 70,386
Depreciation and amortization 91,356 64,967 40,760
Depreciation from Unconsolidated Entities 11,474 17,450 2,045
Minority interest in income 11,684 9,363 7,137
Environmental accrual — — 3,251
Net cash provided by operating activities 293,163 245,329 123,579
Distributions from operations to minority interests (20,929) (20,853) (18,380)
Cash from operations allocable to the Company’s shareholders 272,234 224,476 105,199
Less: preferred stock dividends (88,393) (68,599) (31,124)
Add: non-recurring payment of dividends with respect
to the Series CC convertible stock 13,412 — —
Cash from operations available to common shareholders 197,253 155,877 74,075
Capital improvements to maintain facilities:
Self-storage facilities (30,834) (15,957) (8,509)
Commercial properties (4,283) (4,409) (2,852)
Add back: minority interest share of capital improvements to maintain facilities 2,513 3,159 3,219
Funds available for principal payments on debt, common dividends and reinvestment 164,649 138,670 65,933
Cash distributions to common shareholders (86,181) (67,709) (38,586)
Funds available for principal payments on debt and reinvestment $ 78,468 $ 70,961 $ 27,347
The fiscal 1997 funds available for principal payments on debt and reinvestment includes the start-up operating losses related to PSPUD’s
new portable self-storage business of $31.7 million. Management views such losses as part of the reinvestment of the Company’s internally
generated cash flows in PSPUD.
Distributions requirements: The Company’s 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 debt reductions. During 1995, 1996 and 1997, the
Company distributed to common shareholders approximately 52%, 43% and 44% of its cash available from operations allocable to common
shareholders, respectively.
During 1997, the Company paid dividends totaling $68,534,000 to the holders of the Company’s Senior Preferred Stock, $4,531,000 to
the holders of the Convertible Preferred Stock, $15,328,000 to the holders of the Series CC Convertible Preferred Stock (which converted
to common stock during the second quarter of 1997) and $86,181,000 to the holders of Common Stock. Dividends with respect to the
Senior Preferred Stock include pro-rated amounts for securities issued during 1997. The Company estimates the distribution requirements
for fiscal 1998 with respect to Senior Preferred Stock and the Convertible Preferred Stock to be approximately $80.7 million. Distributions
with respect to the common stock will be determined based upon the Company’s REIT distribution requirements after taking into consideration
distributions to the Company’s preferred shareholders.
Capital improvement requirements: During 1998, the Company has budgeted approximately $27.4 million for capital improvements
($22.9 million for its self-storage facilities and $4.5 million for its commercial properties). The minority interests’ share of the budgeted capital
improvements is approximately $3.8 million.
During 1995, the Company commenced a program to enhance its visual icon and modernize the appearance of its self-storage facilities,
including modernization of signs, paint color schemes, and rental offices. Included in the 1998 capital improvement budget is approximately
$3.2 million with respect to these expenditures.
The significant increase in capital improvements in 1997 for the self-storage facilities (as reflected in the table above) is due to the acquisition
of new facilities in 1997.