Public Storage 1999 Annual Report Download

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1
Public Storage,Inc.
1999 Annual Report
Providing
Storage Solutions . . .

Table of contents

  • Page 1
    Public Storage, Inc. 1999 Annual Report 1 Providing Storage Solutions ...

  • Page 2
    ...One Problem at a Time. 2

  • Page 3
    ... definition does not specifically address the treatment of minority interest in the determination of FFO or the treatment of the amortiz ation of property management agreements and excess purchase cost over net assets acquired. In the case of the Company, FFO represents amounts attributable to its...

  • Page 4
    ... in metropolitan markets, portable self-storage and truck operations and retail stores. These complementary businesses enable us to rent more space at higher prices.You can see the favorable outcome of being customer-centered in our operating results and occupancy levels at the end of 1999. Our key...

  • Page 5
    ... phone calls a month during the peak demand periods, spring and summer. We are enhancing our website to increase customer interactivity, leveraging on a communications medium that may eventually become the world's most significant. Consumers can reserve storage space online, rent trucks and purchase...

  • Page 6
    ...For the third consecutive year, Public Storage satisfied self-storage customers TODAY...and GROW ING! employees helped the U.S. Marine Corps Reserve with its annual Toys for Tots program in Southern California, Dallas/ Fort Worth, Chicago, Seattle and Miami. Marines coordinated the distribution of...

  • Page 7
    ... spend a Saturday afternoon than by discovering something unique and buying it? An avid collector , I see myself as preserving the nostalgia of the past while embracing the wonder of the future. Convenience and security are important to me, so Public Storage is the only logical place for me to keep...

  • Page 8
    ...-storage rentals begin at our national reservation centers. Our national reservation centers have become integral to the way we market our properties, collect customer data and provide storage solutions. Trained agents at our California and newly operational Texas centers evaluate customers' needs...

  • Page 9
    ... starting a family, although we had already inherited or purchased many of the things our child would need.We kept all of our nursery furniture- bassinet, crib, changing table and toys- in a Public Storage unit. Clean, economical storage space helped us complete our lifestyle transition with little...

  • Page 10
    ... drop it off. Customers wanting to use a truck for relocation, however, can rent a clean, late-model vehicle from our subsidiary. The subsidiary also offers the flexibility of one-way truck rentals through an alliance with Penske, which offers special rates to Public Storage customers. NOW BEFORE...

  • Page 11
    does Public S torage mean to A merica? "Focus" "Innovation" "Solutions" "Reputation" "Flexibility" W hen it comes to providing the storage products and services Americans value, Public Storage is the undisputed leader .

  • Page 12
    ...RI 2 CT NJ 13 36 DE 4 MD 35 NY 30 NV 22 CA 289 UT 6 OH 31 VA 37 NC 22 SC 24 AZ 13 AL 21 HI 5 TX 157 LA 10 GA 60 FL 133 Properties (December 31, 1999) Location Number of Properties(1) Net Rentable Square Feet Alabama Arizona California Colorado Connecticut Delaware Florida Georgia Hawaii...

  • Page 13
    ... N Cumulative Redeemable Perpetual Preferred Units were issued by an operating partnership of the Company. The units are non-callable for five years, are subordinate to all debt and have no mandatory redemption date. On March 2, 2000, the Company's Board of Directors authorized the repurchase from...

  • Page 14
    ...RAG E , " NC. 1999 # N N UAL R E P O RT December 31, 1999 December 31, 1998 Assets Cash and cash equivalents Real estate facilities, at cost: Land...Class B Common Stock, $0.10 par value, 7,000,000 shares authorized and issued Paid-in capital Cumulative net income Cumulative distributions paid...

  • Page 15
    ... each of the three years in the period ended December 31, 1999 1999 1998 1997 Revenues: Rental income: Self-storage facilities Commercial properties Portable self-storage facilities Equity in earnings of real estate entities Interest and other income $592,619 8,204 27,028 32,183 16,700 676,734...

  • Page 16
    ... (15,320,505 shares) Repurchase of Common Stock (4,589,427 shares) Net income Distributions to shareholders: Preferred Stock Common Stock regular distribution, $0.88 per share Common Stock special distribution Balances at December 31, 1999 See accompanying notes. $ 718,900 150,000 - - - - - 868...

  • Page 17
    6 Class B Common Stock Paid-in Capital U BLI C 7 T O RAG E , 8 NC. 1999 9 N N UAL R E P O RT Cumulative Net Income Cumulative Distributions Total Shareholders' Equity $700 700 700 700 $1,454,387 (5,075) 393,085 61,385 - - - 1,903,782 293,708 52,949 (71,974) - - - 2,178,...

  • Page 18
    ... RT 1999 1998 1997 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Less gain on disposition of real estate Depreciation and amortization Depreciation included in equity in earnings of real estate entities Minority...

  • Page 19
    ...in process - contribution to joint venture Distributions payable Cumulative distributions paid Issuance of Common Stock: In connection with business combinations To acquire minority interests Acquire partnership interests in real estate entities In connection with conversion of Convertible Preferred...

  • Page 20
    ... 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...

  • Page 21
    ...amortization expense is $4,915,000, $4,317,000, and $1,394,000 in the years ended December 31, 1999, 1998, and 1997, respectively, of depreciation of furniture, fixtures, and equipment of the portable self-storage business. Intangible assets Intangible assets consist of property management contracts...

  • Page 22
    ... 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. The aggregate acquisition cost of the merger was approximately $575,676,000, consisting of...

  • Page 23
    ... 1998 are summarized as follows: (Amounts in thousands) Storage Trust Merger Partnership Acquisitions R EIT Mergers Total 1999 business combinations: Real estate facilities Construction in process Investment in real estate entities Mortgage notes receivable Other assets Accrued liabilities Minority...

  • Page 24
    ... balance Construction in progress: Beginning balance Current development Property acquisitions - merger with Storage Trust Property contribution to unconsolidated real estate entities Newly developed facilities opened for operations Ending balance Total real estate facilities $2,962,291 727,925 36...

  • Page 25
    ... to those real estate entities in which the Company had an ownership interest at December 31, 1999 are as follows: (Amounts in thousands) For the year ended December 31, 1999: Other Equity Investments Development Joint Venture PSB Total Rental income Other income Total revenues Cost of operations...

  • Page 26
    ... million. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. ‡ OTE 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...

  • Page 27
    ... the Company relating to the consolidated operations of the Consolidated Entities. In connection with the merger with Storage Trust, minority interest increased by approximately $27,009,000, reflecting the fair value of 1,011,963 operating partnership units ("OP Units") in Storage Trust's operating...

  • Page 28
    ... the three year period ended December 31, 1999, the Company, pursuant to property management contracts, managed real estate facilities owned by affiliated entities and to a lesser extent by third parties. The property management contracts generally provide for compensation equal to 6% of gross...

  • Page 29
    ... to the merger with Storage Trust Realty and reserved 1,011,963 additional shares for issuance upon conversion of units in Storage Trust Realty's operating partnership. At December 31, 1999, the Company had 4,707,779 shares of common stock reserved in connection with the Company's stock option plans...

  • Page 30
    ... is made based upon earnings and profits of the Company, as defined by the Internal Revenue Code. Distributions declared by the Board of Directors (including distributions to the holders of preferred stock) in 1999 and 1997 were characterized entirely as ordinary income. For 1998, our dividends for...

  • Page 31
    ...certain directors, officers and key employees and service providers to purchase shares of the Company's common stock at a price equal to the fair market value of the common stock at the date of grant. Generally, options under the Plans vest over a three-year period from the date of grant at the rate...

  • Page 32
    ... 1999 { N N UAL R E P O RT 12. Disclosures Regarding Segment Reporting In July 1997, the Financial Accounting Standards Board issued Statement No. 131,"Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), which establishes standards for the way that public business...

  • Page 33
    ...Depreciation (self -storage) Equity in earnings - Depreciation (commercial properties) Equity in earnings - general and administrative and other Interest and other income, excluding property management operations Total other items not allocated to segments Total consolidated company revenues (7,563...

  • Page 34
    ... and amortization - storage real estate Depreciation and amortization - commercial properties Interest and other income, excluding property management operations Corporate general and administrative Interest expense Minority interest in income Gain on disposition of real estate Total other items...

  • Page 35
    ...No. 97-11,"Accounting for Internal Costs Relating to Real Estate Property Acquisitions." The 97-11 Guidance provides that a company shall expense internal preacquisition costs (such as costs of an internal acquisitions department) related to the purchase of an operating property.We do not capitalize...

  • Page 36
    ... 1997, three cases were filed against the Company. Each of the plaintiffs in these cases is suing the Company on behalf of a purported class of California tenants who rented storage spaces from the Company and contends that our fees for late payments under our rental agreements for storage space...

  • Page 37
    ... of Public Storage, Inc. at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Los Angeles, California...

  • Page 38
    ... service and maximize utilization of available storage space. Customers calling either the Company's toll-free telephone referral system, (800) 44-STOR E, or a storage facility are directed to the national reservation system. A representative discusses with the customer space requirements, price...

  • Page 39
    .... On March 12, 1999, we completed a merger transaction with Storage Trust Realty ("Storage Trust"), a publicly traded real estate investment trust. In connection with the merger, we acquired 215 storage properties located in 16 states.We believe that our national telephone reservation system and...

  • Page 40
    ...: Consistent Group Other Facilities Net operating income: Consistent Group Other Facilities Consistent Group data: Gross margin Weighted average: Occupancy Realized annual rent per square foot. Scheduled annual rent per square foot Number of self-storage facilities (at end of period): Consistent...

  • Page 41
    ... all direct and indirect costs of operating and managing the facilities. The following table summarizes major operating expenses with respect to the Consistent Group: (In thousands) 1999 1998 1997 Payroll expense Property taxes Advertising Telephone reservation center costs Other $ 33,997 33,592...

  • Page 42
    ...entity's common stock quoted on the NASDAQ National Market. C ommercial 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...

  • Page 43
    ...of real estate entities $ 32,183 (1) "Other" reflects the Company's 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 1999 equity in earnings of real estate entities...

  • Page 44
    ... operations are primarily attributable to management of self-storage properties. At December 31, 1999, we managed 159 storage facilities (124 owned by Unconsolidated Entities and 35 owned by third parties) pursuant to property management contracts. The property management contracts generally...

  • Page 45
    ... in which the Company is a nonresident), investor relation expenses, certain overhead associated with the acquisition and development of real estate facilities, and certain overhead associated with the portable self-storage business. Included in general and administrative expense for 1999, 1998, and...

  • Page 46
    ... summarizes our investment in real estate facilities as of December 31, 1999: Number of Facilities in which the Company has an ownership interest Storage Commercial Facilities Properties Total Net Rentable Square Footage (in thousands) Storage Commercial Facilities Properties Total Wholly-owned...

  • Page 47
    ... payment of property management fees on all facilities, including those facilities owned by the Company for which no fee is paid. Cost of operations consists of the following: 1999 Payroll expense Property taxes Imputed 6% property management fees Advertising Telephone reservation center costs...

  • Page 48
    ...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 ("R EIT"), our ability to retain cash flow for reinvestment...

  • Page 49
    ...- Gain on sale of real estate Minority interest in income Net cash provided by operating activities Distributions from operations to minority interests Cash from operations allocable to the Company's shareholders Less: preferred stock dividends Add: Non-recurring payment of dividends with respect to...

  • Page 50
    ... for fiscal 2000 with respect to Senior Preferred Stock outstanding at December 31, 1999 to be approximately $100.1 million.With respect to the preferred operating partnership units issued on March 17, 2000, the Company estimates the annual distribution requirement to be approximately $22.8 million...

  • Page 51
    ...are available for purchase, providing us with a source of additional acquisition opportunities. Merger with Storage Trust: On March 12, 1999, the Company and Storage Trust, a public R EIT, completed a merger. As a result of the merger, we acquired 215 storage facilities located in 16 states totaling...

  • Page 52
    ...National Association of Real Estate Investment Trusts, Inc. ("NAR EIT"). The NAR EIT 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 the case of the Company...

  • Page 53
    Ã"UANTITATIVE AND Ã"UALITATIVE DISCLO SURES ABOUT MARKET R ISK To limit our exposure to market risk, we principally finance our operations and growth with permanent equity capital consisting either of common or preferred stock. At December 31, 1999, the Company's debt as a percentage of total ...

  • Page 54
    ...N N UAL R E P O RT Public Storage, Inc. has paid quarterly distributions to its shareholders since 1981, its first full year of operations. Overall distributions per share of Common Stock for 1999 amounted to $1.52, which includes a special distribution declared in November 1999 to shareholders of...

  • Page 55
    ... & Young LLP Los Angeles, California Shareholders may obtain, without charge, a copy of Form 10-K, as filed with the Securities and Exchange Commission by addressing a written request to the Investor Services Department at the Corporate Headquarters. In addition, financial reports, recent filings...

  • Page 56
    Public Storage, Inc. 701 Western Avenue Glendale, California 91201 (818) 244-8080 Address Correction Requested www.publicstorage.com Bulk Rate U.S. Postage PA I D Brockton, MA Permit # 366 w w w. p ublicst or age. com 513-AR-00