Public Storage 1997 Annual Report Download - page 26

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Public Storage, Inc. 1997 Annual Report
(i) under the 1990 Plan, five years after the date they became exercisable and (ii) under the 1994 Plan and 1996 Plan, ten years after the date
of grant. The 1996 Plan also provides for the grant of restricted stock to officers, key employees and service providers on terms determined
by the Audit Committee of the Board of Directors; no shares of restricted stock have been granted.
Information with respect to the Plans during 1997 and 1996 is as follows:
1997 1996
Number Average Number Average
of Price per of Price per
Options Share Options Share
Options outstanding January 1 1,752,169 $19.02 693,667 $13.61
Granted 111,000 28.59 1,183,000 21.39
Exercised (94,786) 11.34 (100,663) 10.29
Canceled (72,168) 20.73 (23,835) 16.02
Options outstanding December 31 1,696,215 $20.03 1,752,169 $19.02
$8.125 $8.125
Option price range at December 31 to $30.00 to $25.875
Options exercisable at December 31 778,012 $17.74 367,947 $13.05
Options available for grant at December 31 3,459,003 3,497,835
In 1996, the Company adopted the disclosure requirement provision of SFAS 123 in accounting for stock-based compensation issued
to employees. As of December 31, 1997 and 1996, there were 1,412,734, and 1,391,500 options outstanding, respectively, that were subject
to SFAS 123 disclosure requirements. The fair value of these options was estimated utilizing prescribed valuation models and assumptions
as of each respective grant date. Based on the results of such estimates, management determined that there was no material effect on net income
or earnings per share for the years ended December 31, 1997 and 1996. The remaining contractual lives were 7.9 years and 8.6 years,
respectively, at December 31, 1997 and 1996.
Note 12. Events Subsequent to December 31, 1997
On January 21, 1998, the Private REIT entered into an agreement with a group of unaffiliated institutional investors under which it would
issue up to $155,000,000 of common stock. An initial $50,000,000 of common stock was issued on January 21, 1998 upon the closing of
the transaction. The remaining $105,000,000 of common stock will be issued as funds are required to purchase commercial properties.
In connection with the merger of the Private REIT into Public Storage Properties XI, Inc. on March 17, 1998 (the surviving entity renamed
PS Business Parks, Inc. – “PSBP”). PSBP exchanged 13 self-storage facilities for 11 commercial properties owned by the Company. Upon
completion of the merger, the Company and its Consolidated Entities owned approximately 58% of PSBP and the Operating Partnership
on a combined basis.
As a result of the March 17, 1998 merger and the agreement to issue additional shares of common stock to the group of unaffiliated
institutional investors, the Company believes that its reduced ownership will no longer warrant the consolidation of these entities effective
March 31, 1998. The Company’s consolidated financial statements include the following summarized condensed financial data associated
with the consolidation of PSBP and the Operating Partnership:
(In thousands) 1997
Year ended December 31,
Rental income $ 30,169
Total revenues $ 31,578
Cost of operations $ 12,519
Depreciation $ 6,973
Net income before minority interest $ 10,623
Net income after minority interest $ 9,247
At December 31,
Total assets, net of accumulated depreciation $344,706
Total minority interest $117,731
Total net assets before minority interest $335,904
In February 1998, Public Storage Properties XX, Inc. (“Properties 20”) agreed, subject to certain conditions, to merge with and into the
Company. Properties 20 is an affiliated publicly traded equity REIT. The merger is conditioned on approval by the shareholders of Properties 20.
The estimated value of the Properties 20 merger is approximately $23.3 million. Properties 20 owns seven self-storage facilities (approximately
402,000 square feet) located in five states. At December 31, 1997, the Company owned approximately 24% of Properties 20. The Company
expects that, if approved by the Properties 20 shareholders, the merger would be completed in the second quarter of 1998.