Public Storage 2003 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 of the 2003 Public Storage annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 169

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169

13
Prohibited Investments and Activities
The Company's Bylaws prohibit the Company from purchasing properties in which the Company's officers
or directors have an interest, or from selling properties to such persons, unless the transactions are approved by a
majority of the independent directors and are fair to the Company based on an independent appraisal. This Bylaw
provision may be changed with shareholder approval. See ''Limitations on Debt'' below for other restrictions in the
Bylaws.
Borrowings
We have a $200 million revolving line of credit (the Credit Agreement) that has a maturity date of
October 31, 2004 and bears an annual interest rate ranging from the London Interbank Offered Rate (LIBOR) plus
0.45% to LIBOR plus 1.50% depending on our credit ratings (currently 0.45%). In addition, we are required to pay
a quarterly commitment fee ranging from 0.20% per annum to 0.30% per annum depending on our credit ratings
(currently the fee is 0.20% per annum). At December 31, 2003 and March 11, 2004, we had no borrowings on our
line of credit.
The Credit Agreement includes various covenants, the more significant of which require us to (i) maintain a
balance sheet leverage ratio of less than 0.50 to 1.00, (ii) maintain certain quarterly interest and fixed-charge
coverage ratios (as defined) of not less than 2.50 to 1.0 and 1.75 to 1.0, respectively, and (iii) maintain a minimum
total shareholders equity (as defined). In addition, we are limited in our ability to incur additional borrowings (we
are required to maintain unencumbered assets with an aggregate book value equal to or greater than two times our
unsecured recourse debt). We were in compliance with all the covenants of the Credit Agreement at December 31,
2003.
As of December 31, 2003, we had notes payable of approximately $76 million. See Notes 7 and 8 to the
consolidated financial statements for a summary of the Companys borrowings at December 31, 2003.
Subject to a limitation on unsecured borrowings in the Company's Bylaws (described below), we have
broad powers to borrow in support of the Company's objectives. We have incurred in the past, and may incur in the
future, both short-term and long-term indebtedness to increase our funds available for investment in real estate,
capital expenditures and distributions.
Limitations on Debt
The Bylaws provide that the Board of Directors shall not authorize or permit the incurrence of any
obligation by the Company which would cause our ''Asset Coverage'' of our unsecured indebtedness to become less
than 300%. Asset Coverage is defined in the Bylaws as the ratio (expressed as a percentage) by which the value of
the total assets (as defined in the Bylaws) of the Company less the Company's liabilities (except liabilities for
unsecured borrowings) bears to the aggregate amount of all unsecured borrowings of the Company. This Bylaw
provision may be changed only upon a shareholder vote.
The Company's Bylaws prohibit us from issuing debt securities in a public offering unless the Company's
''cash flow'' (which for this purpose means net income, exclusive of extraordinary items, plus depreciation) for the
most recent 12 months for which financial statements are available, adjusted to give effect to the anticipated use of
the proceeds from the proposed sale of debt securities, would be sufficient to pay the interest on such securities.
This Bylaw provision may be changed only upon a shareholder vote.
Without the consent of holders of the various series of Senior Preferred Stock, we may not take any action
that would result in a ratio of ''Debt'' to ''Assets'' (the ''Debt Ratio'') in excess of 50%. As of December 31, 2003, the
Debt Ratio was approximately 1.2%. ''Debt'' means the liabilities (other than ''accrued and other liabilities'' and
''minority interest'') that should, in accordance with accounting principles generally accepted in the United States, be
reflected on the Company's consolidated balance sheet at the time of determination. ''Assets'' means the Company's