News Release Exhibit 99.1
Public Storage, Inc.
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
- --------------------------------------------------------------------------------
For Release: Immediately
Date: July 29, 2005
Contact: Mr. Clemente Teng
(818) 244-8080
Public Storage, Inc. Reports Results for the Second Quarter Ended June 30, 2005
GLENDALE, California -Public Storage, Inc. (NYSE and PCX: PSA), announced today
operating results for the quarter ended June 30, 2005.
OPERATING RESULTS FOR THE QUARTER ENDED JUNE 30, 2005:
Net income for the three months ended June 30, 2005 was $108,266,000 compared to
$92,360,000 for the same period in 2004, representing an increase of
$15,906,000, or 17.2%. This increase is primarily due to improved operations
from our self-storage facilities, improved tenant reinsurance operations, and a
decrease in income allocated to preferred minority interests due to the
redemption of our preferred units in the first quarter of 2005. These items were
partially offset by increases in general and administrative, depreciation and
interest expense.
Net income allocable to our common shareholders (after allocating net income to
our preferred and equity shareholders) was $60,763,000 or $0.47 per common share
on a diluted basis for the three months ended June 30, 2005 compared to
$48,204,000 or $0.37 per common share on a diluted basis for the same period in
2004, representing an increase of $0.10 per common share, or 27.0%. The
increases in net income allocable to common shareholders and earnings per common
diluted share are due primarily to the impact of the factors described above.
Weighted average diluted shares increased to 128,618,000 for the three months
ended June 30, 2005 from 128,548,000 for the three months ended June 30, 2004,
due primarily to the exercise of employee stock options.
For the three months ended June 30, 2005 and 2004, we allocated $42,147,000 and
$38,780,000 of our net income, respectively, to our preferred shareholders based
on distributions paid.
OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2005:
Net income for the six months ended June 30, 2005 was $204,677,000 compared to
$161,427,000 for the same period in 2004, representing an increase of
$43,250,000, or 26.8%. This increase is primarily due to improved operations
from our self-storage facilities, improved tenant reinsurance operations, an
increase in equity in earnings of real estate entities, and a decrease in income
allocated to preferred minority interests. These items were partially offset by
increases in general and administrative, depreciation and interest expense.
Minority interest in income declined primarily due to a reduction in redemption
and restructuring costs associated with preferred partnership units and a
reduction in rates on preferred issues. We allocated income to minority
interests pursuant to Emerging Issues Task Force Topic D-42 ("EITF Topic D-42")
totaling $874,000 and $2,063,000 for the six months ended June 30, 2005 and
2004, respectively. In addition, we allocated $8.0 million to preferred minority
interests in the quarter ended March 31, 2004 as a result of a special
distribution associated with a restructuring.
Net income allocable to our common shareholders (after allocating net income to
our preferred and equity shareholders) was $109,482,000 or $0.85 per common
share on a diluted basis for the six months ended June 30, 2005 compared to
$70,131,000 or $0.55 per common share on a diluted basis for the same period in
2004, representing an increase of $0.30 per common share, or 54.5%. The
increases in net income allocable to common shareholders and earnings per common
diluted share are due primarily to the impact of the factors described above.
Weighted average diluted shares increased to 128,895,000 for the six months
ended June 30, 2005 from 128,375,000 for the six months ended June 30, 2004, due
primarily to the exercise of employee stock options.
For the six months ended June 30, 2005 and 2004, we allocated $82,560,000 and
$76,822,000 of our net income, respectively, to our preferred shareholders based
on distributions paid. We also recorded allocations of income to our preferred
shareholders with respect to the application of Emerging Issues Task Force
("EITF") Topic D-42 totaling $1,904,000 (or $0.01 per common share) and
$3,723,000 (or $0.03 per common share) for the six months ended June 30, 2005
and 2004, respectively.
1
FUNDS FROM OPERATIONS:
For the three months ended June 30, 2005, funds from operations ("FFO")
increased to $0.90 per common share on a diluted basis as compared to $0.77 for
the same period in 2004, representing an increase of $0.13 per common share, or
16.9%. For the six months ended June 30, 2005, FFO increased to $1.69 per common
share on a diluted basis as compared to $1.35 for the same period in 2004,
representing an increase of $0.34 per common share, or 25.2%.
For the six months ended June 30, 2005 and 2004, FFO has been negatively
impacted as a result of i) the application of EITF Topic D-42 in connection with
the redemption of preferred securities and, ii) in the case of the first quarter
of 2004, the payment of a special distribution to certain preferred unit holders
in connection with the restructure of the securities.
The following table provides a summary of the impact of these items that have
occurred during the three and six months ended June 30, 2005 and 2004:
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------- ----------------------------------
Percentage Percentage
2005 2004 Change 2005 2004 Change
---------- --------- ---------- -------- -------- -----------
FFO per common share prior to adjustments
for the following items................... $ 0.90 $ 0.77 16.9% $ 1.71 $ 1.46 17.1%
Application of EITF Topic D-42 in
connection with our redemption of
preferred securities...................... - - (0.02) (0.05)
Special distribution paid to preferred
unitholders in connection with
restructuring the terms of the units...... - - - (0.06)
---------- --------- ---------- -------- -------- -----------
FFO per common share, as reported ........ $ 0.90 $ 0.77 16.9% $ 1.69 $ 1.35 25.2%
========== ========= ========== ======== ======== ===========
In addition, FFO per common share for the six months ended June 30, 2005
includes the impact of a gain on the sale of non-real estate assets previously
used by our containerized storage business, totaling approximately $1,143,000
($0.01 per share), which occurred during the first quarter of 2005.
FFO is a term defined by the National Association of Real Estate Investment
Trusts. FFO is a supplemental non-GAAP financial disclosure and it is generally
defined as net income before depreciation and does not include gains or losses
on the disposition of real estate assets. FFO computations do not consider our
scheduled principal payments on debt, capital improvements, distributions, or
other obligations of the Company. FFO is not a substitute for our cash flow or
net income as a measure of our liquidity or operating performance or our ability
to pay dividends. Other REITs may not compute FFO in the same manner;
accordingly, FFO may not be comparable among REITs. FFO is presented because
management and many analysts consider FFO to be one measure of the performance
of real estate companies and because we believe that FFO is helpful to investors
as an additional measure of performance of a REIT. See the attached
reconciliation of net income to funds from operations included in the selected
financial data attached to this press release.
PROPERTY OPERATIONS:
We derive substantially all of our revenues from the ownership and management of
self-storage facilities. In order to evaluate the performance of our overall
self-storage portfolio, we analyze the operating performance of our stabilized
self-storage facilities.
At June 30, 2005, our "Same Store" portfolio consists of 1,269 facilities, which
represents the facilities that we have consolidated in our financial statements
and have been operating on a stabilized basis throughout 2003, 2004, and the
first six months of 2005.
The following table summarizes the pre-depreciation historical operating results
of the Same Store facilities:
2
Selected Operating Data for the Same Store
Facilities (1,269 Facilities):
- ------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------- ----------------------------------------
Percentage Percentage
2005 2004 Change 2005 2004 Change
------------- ------------- ---------- ------------ ------------- ----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income, net of discounts............ $ 194,292 $ 185,905 4.5% $ 383,799 $ 366,515 4.7%
Late charges and administrative fees
collected.......................... 8,939 8,118 10.1% 17,438 16,287 7.1%
------------- ------------- ---------- ------------ ------------- ----------
Total revenues (a)......................... 203,231 194,023 4.7% 401,237 382,802 4.8%
Cost of operations:
Payroll expense............................ 20,988 20,437 2.7% 42,132 41,100 2.5%
Property taxes ............................ 18,134 17,539 3.4% 37,926 36,726 3.3%
Advertising and promotion.................. 6,783 5,519 22.9% 12,627 11,087 13.9%
Repairs and maintenance.................... 6,341 6,744 (6.0)% 13,027 12,793 1.8%
Utilities.................................. 3,762 3,824 (1.6)% 8,262 7,897 4.6%
Property insurance......................... 2,241 2,385 (6.0)% 4,253 4,724 (10.0)%
Telephone reservation center............... 2,039 2,895 (29.6)% 3,791 5,655 (33.0)%
Other costs of management.................. 7,105 7,379 (3.7)% 15,128 14,744 2.6%
------------- ------------- ---------- ------------ ------------- ----------
Total cost of operations (a)................. 67,393 66,722 1.0% 137,146 134,726 1.8%
------------- ------------- ---------- ------------ ------------- ----------
Net operating income (before depreciation) .... $ 135,838 $ 127,301 6.7% $ 264,091 $ 248,076 6.5%
============= ============= ========== ============ ============= ==========
Gross margin................................... 66.8% 65.6% 1.8% 65.8% 64.8% 1.5%
Weighted average for the period:
Square foot occupancy (b).................... 92.1% 91.5% 0.7% 91.0% 90.6% 0.4%
Realized annual rent per occupied square $ 11.42 $ 11.00 3.8% $ 11.41 $ 10.95 4.2%
foot (c)....................................
REVPAF (d)................................... $ 10.51 $ 10.06 4.5% $ 10.39 $ 9.92 4.7%
Weighted average at June 30:
Square foot occupancy........................ 92.4% 91.5% 1.0%
In place annual rent per occupied square
foot (e).................................... $ 12.62 $ 12.22 3.3%
Total net rentable square feet (in thousands).. 73,913 73,913 -
a) See attached reconciliation of these amounts to our consolidated
self-storage revenues and operating expenses. Revenues and cost of
operations do not include revenues and expenses generated at the
facilities with respect to tenant reinsurance, retail sales and truck
rentals.
b) Square foot occupancies represent weighted average occupancy levels over
the entire period.
c) Realized annual rent per occupied square foot is computed by dividing
annualized rental income, net of discounts, by the weighted average
occupied square footage for the period. Realized annual rent per occupied
square foot takes into consideration promotional discounts, bad debt
costs, credit card fees and other costs that reduce rental income from the
contractual amounts due. Realized annual rent per occupied square foot
excludes late charges and administrative fees collected, and it is
presented because we believe annual realized rent per occupied square foot
is an important measure of our operations.
d) Annualized rental income per available square foot ("REVPAF") represents
annualized rental income, net of discounts, divided by total available net
rentable square feet. REVPAF excludes late charges and administrative fees
collected. REVPAF is presented because we believe it is useful in
evaluating our operations.
e) In place annual rent per occupied square foot represents annualized
contractual rents per occupied square foot without reductions for
promotional discounts, and excludes late charges and administrative fees.
3
The growth in rental income during the remainder of 2005 will depend upon
various factors, including our ability to maintain high occupancy levels, and
increase rental rates charged to both new and existing customers. The following
table summarizes additional selected financial data with respect to our Same
Store facilities:
Three Months Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
----------- ------------ ------------ ------------ ---------
Media advertising expense (in 000's):
2004..................................... $ 3,293 $ 1,959 $ 1,989 $ 3,061 $ 10,302
2005..................................... $ 3,525 $ 2,942
REVPAF:
2004..................................... $ 9.77 $ 10.06 $ 10.32 $ 10.27 $ 10.11
2005..................................... $ 10.26 $ 10.51
Weighted average realized annual rent per occupied square foot for the period:
2004..................................... $ 10.90 $ 11.00 $ 11.23 $ 11.31 $ 11.10
2005..................................... $ 11.41 $ 11.42
Weighted average square foot occupancy levels for the period:
2004..................................... 89.7% 91.5% 91.9% 90.8% 91.0%
2005..................................... 89.9% 92.1%
DEVELOPMENT, ACQUISITION AND DISPOSITION ACTIVITIES:
During the second quarter of 2005, we opened one newly developed facility at a
total cost of $6.7 million with 74,000 net rentable square feet. We also
completed two expansions to convert space at former containerized storage
facilities into self-storage space at a total cost of $4.9 million, adding
106,000 net rentable square feet of self-storage space. We also completed an
expansion of an existing self-storage facility at an aggregate cost of
$2,417,000 (which includes a land component of approximately $616,000), adding
34,000 net rentable square feet of storage space.
At June 30, 2005, there were 48 projects that were either under construction or
were expected to begin construction generally within the next year, comprised of
seven newly developed self-storage facilities (555,000 net rentable square feet)
with total estimated cost of $81.2 million, 25 projects (1,478,000 net
additional rentable square feet) which expand existing self-storage facilities
and enhance their visual appeal for a total estimated cost of $111.0 million,
and 16 projects (1,215,000 net rentable square feet) to convert space at former
containerized storage facilities into self-storage space for a total estimated
cost of $45.3 million. These projects will be fully funded by us. Opening dates
for these facilities are estimated through the next 24 months. The development
of these facilities is subject to various risks and contingencies.
During the second quarter of 2005, we acquired eight facilities from third
parties, with an aggregate of 570,000 net rentable square feet, for an aggregate
cost of approximately $58.7 million in cash. These acquisitions were funded
entirely by us.
In addition to the facilities acquired in the quarter ended June 30, 2005, we
acquired three additional facilities for approximately $18.2 million with
235,000 net rentable square feet between July 1, 2005 and July 28, 2005. Also,
at July 29, 2005, we are under contract to acquire 11 additional facilities
(total approximate net rentable square feet of 886,000) at an aggregate cost of
approximately $119.4 million. We anticipate that these acquisitions will be
funded entirely by us. Each of these contracts is subject to significant
contingencies, and there is no assurance that any of these facilities will be
acquired.
During the second quarter of 2005, we acquired a minority interest in two of the
Consolidated Entities for an aggregate acquisition cost of approximately $32.4
million in cash.
During July 2005, in an eminent domain proceeding, one of our self-storage
facilities located in the Portland, Oregon market was condemned. We expect to
receive the proceeds from the disposal of this facility during the third quarter
of 2005, at which time a gain of approximately $5 million will be recorded. This
facility has been reclassified as "discontinued operations" on our June 30, 2005
income statement and "real estate held for disposition" on our balance sheet.
4
ISSUANCE OF PREFERRED SECURITIES:
On April 27, 2005, we issued 5,650,000 depositary shares, with each depositary
share representing 1/1,000 of a share of 6.75% Cumulative Preferred Stock,
Series E. The offering resulted in approximately $141.3 million of gross
proceeds.
COMMON STOCK ACTIVITY:
As previously reported, the Board of Directors has authorized the repurchase of
up to 25,000,000 shares of the Company's common stock. During the quarter ended
June 30, 2005, 32,000 shares were repurchased for approximately $2,019,000. No
additional shares were repurchased between July 1, 2005 and July 29, 2005.
SECOND QUARTER CONFERENCE CALL:
Public Storage, Inc. (NYSE and PCX:PSA) announced today it has changed the date
of hosting of the second quarter 2005 quarterly conference call . A conference
call previously scheduled for Friday, August 5, 2005, is now scheduled for
Monday, August 1, 2005, at 9:00 a.m. (PDT) to discuss the second quarter 2005
earnings results. The participant toll free number is (877) 516-1540 (conference
ID number 7411316). A simultaneous audio web cast may be accessed by using the
link at www.publicstorage.com under "Investor Relations" (conference ID number
7411316). An instant replay of the conference call may be accessed through
September 1, 2005 by calling (800) 642-1687 and through September 1, 2005 by
using the link at www.publicstorage.com under "Investor Relations." Both forms
of replay utilize conference ID number 7411316.
Public Storage, Inc. is a fully integrated, self-administered and self-managed
real estate investment trust that primarily acquires, develops, owns and
operates self-storage facilities. The Company's headquarters are located in
Glendale, California. The Company's self-storage properties are located in 37
states. At June 30, 2005 the Company had interests in 1,480 storage facilities
with approximately 90.6 million net rentable square feet (839,000 rentable
units).
When used within this document, the words "expects," "believes," "anticipates,"
"should," "estimates," and similar expressions are intended to identify
"forward-looking statements" within the meaning of that term in Section 27A of
the Securities Exchange Act of 1933, as amended, and in Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors, which may
cause the actual results and performance of the Company to be materially
different from those expressed or implied in the forward-looking statements.
Such factors are described in Item 1A to the Company's Annual Report on Form
10-K for the year ended December 31, 2004, "Risk Factors," and include changes
in general economic conditions and in the market in which the Company operates
and the impact of competition from new and existing storage and commercial
facilities and other storage alternatives, which could impact rents and
occupancy levels at the Company's facilities; difficulties in the Company's
ability to evaluate, finance and integrate acquired and developed properties
into the Company's existing operations and to fill up those properties, which
could adversely affect the Company's profitability; the impact of the regulatory
environment as well as national, state, and local laws and regulations
including, without limitation, those governing Real Estate Investment Trusts,
which could increase the Company's expense and reduce the Company's cash
available for distribution; consumers' failure to accept the containerized
storage concept which would reduce the Company's profitability; difficulties in
raising capital at reasonable rates, which would impede the Company's ability to
grow; delays in the development process, which could adversely affect the
Company's profitability; and economic uncertainty due to the impact of war or
terrorism could adversely affect our business plan. We disclaim any obligation
to publicly release the results of any revisions to these forward-looking
statements reflecting new estimates, events or circumstances after the date of
this report.
More information about Public Storage, Inc. is available on the Internet. The
Company's Form 10-Q for the quarter ended June 30, 2005, which will be certified
by the Company's CEO and Chief Financial Officer, will be posted to our website,
www.publicstorage.com, when it is filed with the Securities and Exchange
Commission.
Additional financial data attached.
5
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
2005 2004 2005 2004
------------ -------------- ------------- --------------
(In thousands, except per share data)
Revenues:
Rental income:
Self-storage facilities (a)...................... $ 235,363 $ 212,905 $ 462,812 $ 418,777
Commercial properties (a)........................ 2,927 2,731 5,775 5,357
Containerized storage facilities (a)............. 3,988 5,245 7,825 10,051
Tenant reinsurance premiums........................ 6,251 6,093 12,167 12,056
Interest and other income.......................... 5,767 2,583 9,322 3,940
------------ -------------- ------------- --------------
254,296 229,557 497,901 450,181
------------ -------------- ------------- --------------
Expenses:
Cost of operations:
Self-storage facilities (a)...................... 80,438 74,437 162,121 149,951
Commercial properties (a)........................ 1,043 1,041 2,170 2,169
Containerized storage facilities (a)............. 3,274 2,894 6,016 5,668
Tenant reinsurance............................... 1,566 3,750 4,543 6,885
Depreciation and amortization...................... 48,261 44,683 96,219 91,093
General and administrative......................... 6,128 4,572 11,269 10,456
Interest expense................................... 1,794 - 3,457 100
------------ -------------- ------------- --------------
142,504 131,377 285,795 266,322
------------ -------------- ------------- --------------
Income from continuing operations before equity in
earnings of real estate entities and minority
interest in income................................. 111,792 98,180 212,106 183,859
Equity in earnings of real estate entities ........... 4,851 4,405 10,529 8,462
Minority interest in income:
Allocable to preferred minority interests:
Based upon ongoing distributions................... (3,590) (5,177) (8,965) (11,731)
Special distribution and EITF Topic D-42 allocation
(b)................................................ - - (874) (10,063)
Other partnership interests .......................... (4,878) (4,580) (9,273) (8,583)
------------ -------------- ------------- --------------
Income from continuing operations...................... 108,175 92,828 203,523 161,944
Gain on disposition of real estate................. 53 - 53 -
Discontinued operations (a)........................ 38 (468) 1,101 (517)
------------ -------------- ------------- --------------
Net income $ 108,266 $ 92,360 $ 204,677 $ 161,427
============ ============== ============= ==============
Net income allocation:
- ----------------------
Allocable to preferred shareholders:
Based on distributions paid...................... $ 42,147 $ 38,780 $ 82,560 $ 76,822
Based on redemptions of preferred stock.......... - - 1,904 3,723
Allocable to equity shareholders, Series A......... 5,356 5,376 10,731 10,751
Allocable to common shareholders................... 60,763 48,204 109,482 70,131
------------ -------------- ------------- --------------
$ 108,266 $ 92,360 $ 204,677 $ 161,427
============ ============== ============= ==============
Per common share:
Net income per share - Diluted..................... $ 0.47 $ 0.37 $ 0.85 $ 0.55
============ ============== ============= ==============
Net income per share - Basic....................... $ 0.47 $ 0.38 $ 0.85 $ 0.55
============ ============== ============= ==============
Weighted average common shares - Diluted (c)....... 128,618 128,548 128,895 128,375
============ ============== ============= ==============
Weighted average common shares - Basic (c)......... 127,986 127,632 128,284 127,407
============ ============== ============= ==============
(a) The historical operations of a self-storage facility that was condemned in
July 2005, a commercial facility that we sold in 2004, and the historical
operations of the containerized storage facilities that we have closed are
included in "Discontinued operations." Discontinued operations includes a
gain on sale of non-real estate assets previously used by the discontinued
containerized storage operations totaling approximately $1,143,000 during
the six months ended June 30, 2005.
(b) On March 17, 2005, we redeemed all outstanding 9.5% Series N ($40,000,000)
preferred units and on March 29, 2005 we redeemed all outstanding 9.125%
Series O ($45,000,000) preferred units. In accordance with the SEC's
clarification of EITF Topic D-42, we allocated $874,000 to minority
6
interests, representing costs incurred when these units were originally
issued. As previously reported, in the first quarter of 2004 the holders of
$200 million of the Series N preferred units agreed, in exchange for a
special distribution of $8.0 million, to a reduction in the distribution
rate on their preferred units from 9.50% per year to 6.40% per year,
effective March 22, 2004. This $8.0 million special distribution was
reflected as minority interest in income in the six months ended June 30,
2004, along with $2,063,000 in costs incurred when the $200 million in
units were originally issued, in accordance with EITF Topic D-42. The
ongoing distributions reflect a partial period for the time the units were
outstanding during each period.
(c) The increase in weighted average common share - basic and diluted was due
primarily to the issuance of an aggregate of approximately 2,155,000 shares
of common stock in connection with the exercise of employee stock options
and vesting of restricted stock units since January 1, 2004, offset
partially by the repurchase and retirement of an aggregate of approximately
1,166,000 shares of common stock since January 1, 2004.
7
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
June 30, December 31,
2005 2004
---------------- -----------------
(unaudited)
(In thousands, except share and per
share data)
ASSETS
Cash and cash equivalents .................................... $ 390,431 $ 366,255
Operating real estate facilities:
Land and building, at cost................................. 5,647,432 5,510,750
Accumulated depreciation................................... (1,406,564) (1,320,200)
---------------- -----------------
4,240,868 4,190,550
Construction in process....................................... 41,296 47,277
Real estate held for disposition, net......................... 1,430 -
Land held for development..................................... 8,404 8,883
---------------- -----------------
4,291,998 4,246,710
Investment in real estate entities............................ 329,148 341,304
Goodwill...................................................... 78,204 78,204
Intangible assets, net........................................ 101,383 104,685
Other assets.................................................. 65,479 67,632
---------------- -----------------
Total assets........................................... $ 5,256,643 $ 5,204,790
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable................................................. $ 116,147 $ 129,519
Debt to joint venture partner................................. 35,610 16,095
Preferred stock called for redemption......................... - 54,875
Accrued and other liabilities................................. 152,163 145,431
---------------- -----------------
Total liabilities...................................... 303,920 345,920
Minority interest - preferred................................. 225,000 310,000
Minority interest - other..................................... 100,756 118,903
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized, 1,691,236 shares issued (in series) and outstanding
(3,980,186 at December 31, 2004), at liquidation preference:
Cumulative Preferred Stock, issued in series............. 2,320,900 2,102,150
Common Stock, $0.10 par value, 200,000,000 shares authorized,
127,975,653 shares issued and outstanding (128,526,450 at
December 31, 2004)....................................... 12,798 12,853
Equity Stock, Series A, $0.01 par value, 200,000,000 shares
authorized, 8,753.193 shares issued and outstanding
(8,776.102 at December 31, 2004) ........................ - -
Paid-in capital............................................ 2,440,152 2,457,568
Cumulative net income...................................... 2,937,550 2,732,873
Cumulative distribution paid............................... (3,084,433) (2,875,477)
---------------- -----------------
Total shareholders' equity............................... 4,626,967 4,429,967
---------------- -----------------
Total liabilities and shareholders' equity............. $ 5,256,643 $ 5,204,790
================ =================
8
Selected Financial Data
Computation of Funds from Operations (a)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
2005 2004 2005 2004
-------------- ------------ ------------- ------------
(Amounts in thousands, except per share data)
Computation of Funds from Operations (FFO) allocable to Common
Stock
Net income..................................................... $ 108,266 $ 92,360 $ 204,677 $ 161,427
Add back - depreciation and amortization................... 48,261 44,683 96,219 91,093
Add back - depreciation and amortization included in
Discontinued Operations................................ 21 383 68 821
Add back - our pro rata share of depreciation from equity
investments............................................ 8,758 8,259 17,443 16,534
Eliminate - depreciation with respect to non-real estate (772) (1,078) (1,682) (2,226)
assets.....................................................
Eliminate - our pro rata share of gain on sale of real
estate included in equity of earnings of real estate (441) 74 (1,706) 74
entities...............................................
Eliminate - gain on sale of real estate.................... (53) - (53) -
Add back - minority interest share of income............... 8,468 9,757 19,112 30,377
-------------- ------------ ------------- ------------
Consolidated FFO............................................... 172,508 154,438 334,078 298,100
Allocable to preferred minority interest:
Based upon ongoing distributions (b)....................... (3,590) (5,177) (8,965) (11,731)
Special distribution and EITF Topic D-42 allocation (b).... - - (874) (10,063)
Allocable to minority interest - other partnership interests... (6,101) (6,299) (11,816) (11,877)
-------------- ------------ ------------- ------------
Remaining FFO allocable to our shareholders.................... 162,817 142,962 312,423 264,429
Less: allocations to preferred and equity stock shareholders:
Preferred shareholder distributions........................ (42,147) (38,780) (82,560) (76,822)
Issuance costs on redeemed preferred shares................ - - (1,904) (3,723)
Equity Stock, Series A distributions....................... (5,356) (5,376) (10,731) (10,751)
-------------- ------------ ------------- ------------
Remaining FFO allocable to our common shareholders (a)......... $ 115,314 $ 98,806 $ 217,228 $ 173,133
============== ============ ============= ============
Weighted average common shares outstanding:
Common shares outstanding.................................. 127,986 127,632 128,284 127,407
Weighted average stock options and restricted stock units
outstanding using treasury method.......................... 632 916 611 968
-------------- ------------ ------------- ------------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share............................. 128,618 128,548 128,895 128,375
============== ============ ============= ============
FFO per common share (a) (c)................................... $ 0.90 $ 0.77 $ 1.69 $ 1.35
============== ============ ============= ============
(a) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts ("NAREIT"). It is generally defined as net
income before depreciation with respect to real estate assets and gains and
losses on real estate assets. FFO is presented because management and many
analysts consider FFO to be one measure of the performance of real estate
companies and because we believe that FFO is helpful to investors as an
additional measure of the performance of a REIT. FFO computations do not
consider scheduled principal payments on debt, capital improvements,
distribution, and other obligations of the Company. FFO is not a substitute
for our cash flow or net income as a measure of our liquidity or operating
performance or our ability to pay dividends. Other REITs may not compute
FFO in the same manner; accordingly, FFO may not be comparable among REITs.
(b) On March 17, 2005, we redeemed all outstanding 9.5% Series N ($40,000,000)
preferred units, and on March 29, 2005 we redeemed all outstanding 9.125%
Series O ($45,000,000) preferred units and, in accordance with the SEC's
clarification of EITF Topic D-42, we allocated $874,000 to minority
interests, representing costs incurred when these units were originally
issued. As previously reported, in the first quarter of 2004 the holders of
$200 million of the Series N preferred units agreed, in exchange for a
special distribution of $8.0 million, to a reduction in the distribution
rate on their preferred units from 9.50% per year to 6.40% per year,
effective March 22, 2004. This $8.0 million special distribution was
reflected as minority interest in income in the six months ended June 30,
2004, along with $2,063,000 in costs incurred when the $200 million in
units were originally issued, in accordance with EITF Topic D-42. The
ongoing distributions reflect a partial period for the time the units were
outstanding during each period.
(c) FFO per common share for the six months ended June 30, 2005 was positively
impacted by a gain on sale of non-real estate assets previously used by our
discontinued containerized storage business totaling approximately
$1,143,000 or $0.01 per common share for the quarter ended March 31, 2005.
9
Public Storage, Inc.
Selected Financial Data
Computation of Funds Available for Distribution (b)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ----------- ------------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to our common shareholders (a)............. $ 115,314 $ 98,806 $ 217,228 $ 173,133
Add: Stock-based compensation expense.................... 1,152 753 2,383 1,406
Impact of application of EITF Topic D-42................. - - 2,778 5,786
EITF Topic D-42 charges included in equity in earnings of
real estate entities..................................... 131 - 131 943
Less: Capital expenditures to maintain facilities........ (2,564) (6,939) (9,370) (9,644)
------------ ------------ ----------- ------------
Funds available for distribution ("FAD") (b)............. $ 114,033 $ 92,620 $ 213,150 $ 171,624
============ ============ =========== ============
Distribution to common shareholders...................... $ 57,593 $ 57,407 $ 115,665 $ 114,755
============ ============ =========== ============
Distribution payout ratio (b)............................ 50.5% 62.0% 54.3% 66.9%
============ ============ =========== ============
(a) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts ("NAREIT"). It is generally defined as net
income before depreciation and gains and losses on real estate assets. FFO
is presented because management and many analysts consider FFO to be one
measure of the performance of real estate companies and because we believe
that FFO is helpful to investors as an additional measure of the
performance of a REIT. FFO computations do not consider scheduled principal
payments on debt, capital improvements, distribution, and other obligations
of the Company. FFO is not a substitute for our cash flow or net income as
a measure of our liquidity or operating performance or our ability to pay
dividends. Other REITs may not compute FFO in the same manner; accordingly,
FFO may not be comparable among REITs.
(b) Funds available for distribution ("FAD") represents FFO, plus 1) impairment
charges with respect to real estate assets, 2) the non-cash portion of
stock-based compensation expense, and 3) income allocation to preferred
equity holders in accordance with EITF Topic D-42, less capital
expenditures. The distribution payout ratio is computed by dividing the
distribution paid to common shareholders by FAD. FAD is presented because
many analysts consider it to be a measure of the performance of real estate
companies and because we believe that FAD is helpful to investors as an
additional measure of the performance of a REIT. FAD is not a substitute
for our cash flow or net income as a measure of our liquidity, operating
performance, or our ability to pay dividends. Other REITs may not compute
FAD in the same manner; accordingly, FAD may not be comparable among REITs.
10
Public Storage, Inc.
Selected Financial Data
Reconciliation of Same Store Revenues and Cost of Operations
To Consolidated Self-Storage Rental Income and Cost of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2005 2004 2005 2004
------------- ------------ ------------- ------------
(Amounts in thousands)
Revenues for the 1,269 Same Store facilities......... $ 203,231 $ 194,023 $ 401,237 $ 382,802
Revenues for non-Same Store facilities (a): Development
facilities (year opened):
2001 and 2002................................. 5,372 4,646 10,524 8,883
2003.......................................... 3,158 1,987 6,055 3,386
2004.......................................... 1,247 138 2,254 147
2005.......................................... 48 - 50 -
Acquisition facilities (year acquired):
2004.......................................... 7,454 - 14,450 -
2005.......................................... 1,377 - 1,877 -
Expansion facilities............................. 9,391 8,686 18,393 16,957
Combination facilities........................... 4,085 3,425 7,972 6,602
------------- ------------ ------------- ------------
Consolidated self-storage revenues (b)................. $ 235,363 $ 212,905 $ 462,812 $ 418,777
============= ============ ============= ============
Cost of operations for the 1,269 Same Store facilities. $ 67,393 $ 66,722 $ 137,146 $ 134,726
Cost of operations for non-Same Store facilities (a):
Development facilities (year opened):
2001 and 2002................................. 1,992 1,933 3,980 4,037
2003.......................................... 1,110 1,103 2,099 2,130
2004.......................................... 659 310 1,178 403
2005.......................................... 94 - 117 -
Acquisition facilities (year acquired):
2004.......................................... 3,206 - 6,357 -
2005.......................................... 674 - 951 -
Expansion facilities............................. 3,412 3,080 6,788 5,941
Combination facilities........................... 1,898 1,289 3,505 2,714
------------- ------------ ------------- ------------
Consolidated self-storage cost of operations (b)....... $ 80,438 $ 74,437 $ 162,121 $ 149,951
============= ============ ============= ============
(a) We consolidate the operating results of additional self-storage facilities
that are not Same Store facilities. Such facilities are not included in the
Same Store pool either because they were not stabilized for the entire
period from January 1, 2003 through June 30, 2005, or because we acquired
these facilities from third parties after December 31, 2002.
(b) Self-storage revenues and cost of operations do not include revenues and
expenses generated at the facilities with respect to tenant reinsurance,
retail sales and truck rentals.
11