Public Storage 1999 Annual Report Download - page 52

50
Funds from operations: Total funds from operations or “FFO” increased to $429.0 million for the year ended 1999 compared to $336.4 mil-
lion for the year ended 1998 and $272.2 million in 1997. FFO available to common shareholders (after deducting preferred stock dividends)
increased to $334.2 million for the year ended December 31, 1999 compared to $258.0 million in 1998 and $197.3 million in 1997. FFO
means net income (loss) (computed in accordance with generally accepted accounting principles) before (i) gain (loss) on early extinguishment
of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and
amortization (including the Company’s pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization
of assets acquired in a merger, including property management agreements and goodwill), and (ii) less FFO attributable to minority interests.
FFO is a supplemental performance measure for equity R EITs as defined by the 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, FFO represents amounts
attributable to its shareholders after deducting amounts attributable to the minority interests and before deductions for the amortization of
property management agreements and goodwill. FFO is presented because management, as well as many industry analysts, consider FFO to
be one measure of the performance of the Company and it is used in establishing the terms of the Class B Common Stock. FFO does not
take into consideration capital improvements, scheduled principal payments on debt, distributions and other obligations of the Company.
Accordingly, FFO is not a substitute for the Company’s cash flow or net income (as discussed above) as a measure of the Company’s liquidity
or operating performance. FFO is not comparable to similarly entitled items reported by other R EITs that do not define it exactly as we have
defined it.
Impact of t he Year 2000
The “Y2K Issue” arises because many computerized systems use two digits rather than four to identify a year. Any of our computer programs
or hardware with the Y2K Issue that have date-sensitive applications or embedded chips could recognize a date using “00” as the year 1900
rather than the year 2000. The same issue has been faced by our outside vendors, including those vendors in the banking and payroll processing
areas. Any failure in these areas could result in disruptions of operations.
As a result of our assessment and remediation activities conducted in recent years, we experienced no significant disruptions in our
operations, and believe that our information systems responded successfully to the Y2K date change.
At this time, we are not aware of any material problems that resulted from the Y2K date change at any of our outside vendors,
including those vendors in the banking and payroll processing areas.
We will continue to monitor our information systems and those of our outside vendors throughout the year 2000 to ensure that
any latent Y2K Issues that may arise are addressed promptly.
The cost of the Company’s year 2000 compliance activities, substantially all of which have been incurred through December 31,
1999, is estimated at approximately $4.4 million. These costs are capitalized.
There can be no assurance that we have identified all potential Y2K Issues either within our information systems, at our outside
vendors, or at external agents. In addition, the impact of any unresolved or unidentified Y2K Issues on governmental entities and utility
providers and the resultant impact upon the Company, as well as disruptions in the general economy, may be material but cannot be
reasonably determined or quantified.
Publ ic St orage, Inc. 1999 Annual Repor t