Public Storage 2011 Annual Report Download - page 64

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Liquidity and Capital Resources
We believe that our cash balances and the internally generated net cash provided by our operating activities
will continue to be sufficient to enable us to meet our operating expenses, debt service requirements, capital
improvements and distribution requirements to our shareholders for the foreseeable future.
Operating as a REIT, our ability to retain cash flow for reinvestment is restricted. In order for us to
maintain our REIT status, a substantial portion of our operating cash flow must be distributed to our shareholders
(see “Requirement to Pay Distributions” below). However, despite the significant distribution requirements, we
have been able to retain a significant amount of our operating cash flow. The following table summarizes our ability
to fund capital improvements to maintain our facilities, distributions to the noncontrolling interests, capital
improvements to maintain our facilities, and distributions to our shareholders through the use of cash provided by
operating activities. The remaining cash flow generated is available to make both scheduled and optional principal
payments on debt and for reinvestment.
For the Year Ended December 31,
2011
2010
2009
(Amount in thousands)
Net cash provided by operating activities (a) ......................................................
$ 1,203,452
$ 1,093,221
$ 1,112,857
Capital improvements to real estate facilities .....................................................
(69,777)
(77,500)
(62,352)
Remaining operating cash flow available for distributions to equity holders .....
1,133,675
1,015,721
1,050,505
Distributions paid to noncontrolling interests .....................................................
(14,314)
(24,542)
(28,267)
Distributions paid to Public Storage shareholders ..............................................
(846,246)
(754,770)
(624,665)
Cash from operations available for principal payments on debt and
reinvestment (b) ..............................................................................................
$ 273,115
$ 236,409
$ 397,573
(a) Represents net cash provided by operating activities for each respective year as presented in our December 31, 2011
statements of cash flows.
(b) We present cash from operations for principal payments on debt and reinvestment because we believe it is an important
measure to evaluate our ongoing liquidity. This measure is not a substitute for cash flows from operations or net cash flows
in evaluating our liquidity, ability to repay our debt, or to meet our distribution requirements.
Our financial profile is characterized by a low level of debt-to-total-capitalization. We expect to fund our
long-term growth strategies and debt obligations with (i) cash at December 31, 2011, (ii) internally generated
retained cash flows, (iii) depending upon market conditions, proceeds from the issuance of common or preferred
equity securities, and (iv) in the case of acquisitions of facilities, the assumption of existing debt. In general, our
strategy is to continue to finance our growth with permanent capital, either retained operating cash flow or capital
raised through the issuance of common or preferred equity to the extent that market conditions are favorable.
We have elected to use preferred securities as a form of leverage despite the fact that the dividend rates of
our preferred securities exceed the prevailing market interest rates on conventional debt. We have chosen this
method of financing for the following reasons: (i) under the REIT structure, a significant amount of operating cash
flow needs to be distributed to our shareholders, making it difficult to repay debt with operating cash flow alone, (ii)
our perpetual preferred shares have no sinking fund requirement or maturity date and do not require redemption, all
of which eliminate future refinancing risks, (iii) after the end of a non-call period, we have the option to redeem the
preferred shares at any time, which enables us to refinance higher coupon preferred shares with new preferred shares
at lower rates if appropriate, (iv) preferred shares do not contain covenants, thus allowing us to maintain significant
financial flexibility, and (v) dividends on the preferred shares can be applied to satisfy our REIT distribution
requirements.
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