Public Storage 1999 Annual Report Download - page 39

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We will continue to focus our growth strategies on: (i) improving the operating performance of our existing traditional self-storage
properties, (ii) increasing our ownership of storage facilities through additional investments, (iii) improving the operating performance of
the portable storage business and (iv) participating in the growth of PS Business Parks, Inc. Major elements of these strategies are as follows:
• We will continue to focus upon enhancing the operating performance of our existing traditional self-storage properties, primarily through
increases in revenues achieved through the telephone reservation center and associated marketing efforts. These increases in revenue levels
are expected to result primarily from increases in realized rent per occupied square foot rather than significant increases in occupancy levels.
• We will continue to focus on improving the operations of the portable self-storage operations. The Company and PSPUD are developing
facilities that combine portable self-storage and traditional self-storage (“Combination Facilities”) which will replace existing third-party
leased facilities and reduce third-party lease expense.We believe that Combination Facilities offer efficiencies and a more effective method
to meet customers’needs than a stand-alone portable self-storage facility.We expect that, upon completion of our combination facility
development program, substantially all of the portable self-storage facilities will be operated in Combination Facilities.
• We expect to continue our storage facility development program. Over the past two years, the Company and certain development joint
ventures that it has an interest in opened a total of 41 storage facilities at a cost of approximately $198 million, with 2,563,000 net rentable
square feet. The Company and its development joint ventures have a total of 64 projects identified for openings after December 31, 1999 at
a total cost of $362 million. These 64 projects (which includes Combination Facilities) are comprised of 47 storage facilities in process (total
estimated costs upon completion of $256 million) and 17 storage facilities identified that have not yet begun construction (estimated costs
upon completion of approximately $106 million). Generally, the construction period takes nine to 12 months, followed by an 18 to 24 month
fill-up process. Throughout the fill-up period, we experience earnings dilution to the extent of our interest in the developed properties.
• We will acquire facilities from third parties when appropriate. O n 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 marketing organization present an opportunity for
increased revenues through higher occupancies of the properties acquired, as well as cost efficiencies through greater critical mass.
ESU LT S O F PERAT ION S
Net income and earnings per common share: Net income for 1999, 1998 and 1997 was $287,885,000, $227,019,000 and $178,649,000
respectively. Net income allocable to common shareholders (net income less preferred stock dividends) for 1999, 1998 and 1997 was
$193,092,000, $148,644,000 and $90,256,000, respectively. On a diluted basis, net income per common share was $1.52 per common share
(based on weighted average shares outstanding of 126,669,000) for 1999, $1.30 per common share (based on weighted average shares
outstanding of 114,357,000) for 1998 and $0.91 (based on weighted average shares outstanding of 98,961,000) for 1997.
The increase in net income per share for 1999 compared to 1998 was principally the result of improved real estate operations and the
impact of decreased start-up operating losses of the portable self-storage business. The increase in net income in 1998 compared to 1997
was principally the result of improved real estate operations and the impact of a special dividend paid in 1997 described below.
Net income allocable to common shareholders and net income per common share for the year ended December 31, 1997 was negatively
impacted by a special dividend totaling $13,412,000, paid to the holders of the Series CC Convertible Preferred Stock (“Series CC”) during
the first quarter of 1997. During the second quarter of 1997, the Series CC stock converted into common stock of the Company. Accordingly
during 1997, all of the $13,412,000 ($0.14 per common share, on a diluted basis) of dividends were treated as an allocation of net income to
the preferred shareholders in determining the allocation of net income to the common shareholders.
EAL STAT E PERAT IO N S
Self-storage operations: Our self-storage operations are by far the largest component of our operations, representing approximately 88% of
total revenues generated during 1999. At the end of 1996, we had a total of 721 self-storage facilities included in our consolidated financial
statements. Since that time we have increased the number of self-storage facilities by 480 (1997 – 173 facilities, 1998 – 57 facilities and 1999 –
250 facilities). As a result of significant acquisitions of self-storage facilities in each of the past three years, year over year comparisons as
presented on the consolidated statements of income with respect to our self-storage operations are not meaningful.
U B LI C T O RAG E,N C . 1999 N N UAL RE P O RT