Exhibit 99.1
News Release
Public Storage, Inc.
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
- --------------------------------------------------------------------------------
For Release: Immediately
Date: February 6, 2006
Contact: Mr. Clemente Teng
(818) 244-8080
PUBLIC STORAGE, INC. REPORTS RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED
DECEMBER 31, 2005
GLENDALE, California -Public Storage, Inc. (NYSE and PCX:PSA) announced today
operating results for the quarter and year ended December 31, 2005.
OPERATING RESULTS FOR THE QUARTER ENDED DECEMBER 31, 2005:
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Net income for the three months ended December 31, 2005 was $123,372,000
compared to $107,271,000 for the same period in 2004, representing an increase
of $16,101,000, or 15%. This increase is primarily due to improved operations
from our Same Store, newly developed and acquired self-storage facilities, a
gain on the disposition of real estate assets, reduced minority interest in
income and higher interest income. These items were partially offset by
increases in general and administrative expense, depreciation and interest
expense along with a decrease from equity in earnings of real estate entities.
Net operating income (before depreciation) for our Same Store facilities
increased by 9.4% as a result of a 5.0% improvement in revenues combined with a
3.4% reduction in cost of operations. Equity in earnings of real estate entities
was lower in the fourth quarter of 2005 as compared to the same period in 2004
primarily due to a gain recorded in 2004 as a result of the sale of real estate
recorded by one of the entities in which we have an interest. General and
administrative expense increased due to higher stock option and legal expenses
in 2005 combined with an adjustment to a legal accrual that reduced general and
administrative expense in the fourth quarter of 2004.
Net income allocable to our common shareholders (after allocating net income to
our preferred and equity stock shareholders) was $65,651,000 or $0.51 per common
share on a diluted basis for the three months ended December 31, 2005 compared
to $59,335,000 or $0.46 per common share on a diluted basis for the same period
in 2004, representing an increase of $0.05 per common share, or 11%. The
increases in net income allocable to our common shareholders and net income per
common share on a diluted basis are due primarily to the impact of the factors
described above with respect to the increase in net income partially offset by
increased income allocated to our preferred shareholders, due to the factors
described below. Weighted average diluted shares decreased to 128,743,000 for
the three months ended December 31, 2005 from 129,088,000 for the three months
ended December 31, 2004.
For the three months ended December 31, 2005 and 2004, we allocated $46,731,000
and $40,632,000 of our net income, respectively, to our preferred shareholders
based on distributions paid. The year-over-year increase is due to the issuance
of additional preferred securities, partially offset by the redemption of
preferred securities that had higher dividend rates than the newly preferred
securities issued. For the three months ended December 31, 2005 and 2004, we
also recorded an additional allocation of net income to our preferred
shareholders and a corresponding reduction of net income allocation to our
common shareholders of $5,634,000 (or $0.04 per common share) and $1,929,000 (or
$0.01 per common share), respectively, pursuant to Emerging Issues Task Force
("EITF") Topic D-42 in connection with the redemption of preferred securities.
OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2005:
- -------------------------------------------------------
Net income for the year ended December 31, 2005 was $456,393,000 compared to
$366,213,000 for the same period in 2004, representing an increase of
$90,180,000, or 25%. This increase is primarily due to improved operations from
our Same Store, newly developed and acquired self-storage facilities, reduced
minority interest in income, increased gains on the disposition of real estate
assets and higher interest income. These items were partially offset by
increases in depreciation, general and administrative expense, and interest
expense.
Net operating income (before depreciation) for our Same Store facilities
increased by 7.2% as a result of a 4.9% improvement in revenues offset partially
by a 0.5% increase in cost of operations. Minority interest in income declined
primarily due to a reduction in redemption and restructuring costs associated
with preferred partnership units in 2004 combined with the redemption of
preferred partnership units during 2005. General and administrative expense
increased due to higher stock option and legal expenses in 2005 combined with an
adjustment to a legal accrual that reduced general and administrative expense in
2004. Interest expense increased primarily as a result of increased debt levels.
1
We allocated income to minority interests pursuant to EITF Topic D-42 totaling
$874,000 and $2,063,000 for the year ended December 31, 2005 and 2004,
respectively. In addition, during the year ended December 31, 2004, we allocated
$8.0 million to preferred minority interests 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 stock shareholders) was $254,395,000 or $1.97 per
common share on a diluted basis for the year ended December 31, 2005 compared to
$178,063,000 or $1.38 per common share on a diluted basis for the same period in
2004, representing an increase of $0.59 per common share, or 43%. The increases
in net income allocable to common shareholders and net income per common diluted
share are due primarily to the impact of the factors described above with
respect to the increase in net income, partially offset by an increase in net
income allocated to our preferred shareholders. Weighted average diluted shares
increased to 128,819,000 for the year ended December 31, 2005 from 128,681,000
for the year ended December 31, 2004.
For the year ended December 31, 2005 and 2004, we allocated $173,017,000 and
$157,925,000 of our net income, respectively, to our preferred shareholders
based on distributions paid. The year-over-year increase is due to the issuance
of additional preferred securities, partially offset by the redemption of
preferred securities at higher dividend rates than the newly preferred
securities issued. We also recorded allocations of income to our preferred
shareholders with respect to the application of EITF Topic D-42 totaling
$7,538,000 (or $0.06 per common share) and $8,724,000 (or $0.07 per common
share) for the year ended December 31, 2005 and 2004, respectively.
FUNDS FROM OPERATIONS:
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For the three months ended December 31, 2005, funds from operations ("FFO")
increased to $0.96 per common share on a diluted basis as compared to $0.82 for
the same period in 2004, representing an increase of $0.14 per common share, or
17.1%. For the year ended December 31, 2005, FFO increased to $3.61 per common
share on a diluted basis as compared to $2.93 for the same period in 2004,
representing an increase of $0.68 per common share, or 23.2%.
Comparisons of FFO per common share for the three and twelve months ended
December 31, 2005 and 2004 have been impacted as a result of (i) the application
of EITF Topic D-42 in connection with the redemption of preferred securities,
including amounts in equity in earnings of real estate entities, (ii) a payment
of a special distribution to certain preferred unitholders in connection with
the restructure of the securities in the first quarter of 2004, (iii) an
approximately $1,250,000 reduction to a legal accrual in the fourth quarter of
2004 as a result of resolution of a legal matter, (iv) the impact of an
approximately $1,143,000 gain on the sale, in the first quarter of 2005, of
non-real estate assets previously used by our containerized storage business and
(v) losses incurred in our tenant reinsurance business, as well as property
casualty losses, caused by hurricanes.
The following table provides a summary of the impact of these items that have
occurred during the three months and year ended December 31, 2005 and 2004:
Three Months Ended December 31, Year Ended December 31,
---------------------------------- ----------------------------------
Percentage Percentage
2005 2004 Change 2005 2004 Change
----------- --------- ---------- --------- ----------- ----------
FFO per common share, as reported....... $ 0.96 $ 0.82 17% $ 3.61 $ 2.93 23%
Aggregate impact from the application
of EITF Topic D-42 in connection
with the redemption of preferred 0.04 0.01 0.07 0.10
securities..........................
Special distribution paid to
preferred unitholders in connection
with restructuring the terms of the - - - 0.06
units...............................
Reduction to legal accruals as the
result of resolution of a legal - (0.01) - (0.01)
matter..............................
Gain on the sale of non-real estate
assets previously used by our
containerized storage business...... - - (0.01) -
Tenant insurance claims expense and
casualty losses from hurricanes..... 0.02 - 0.02 0.02
----------- --------- ---------- --------- ----------- ----------
FFO per common share prior to the
impact of the above items........... $ 1.02 $ 0.82 24% $ 3.69 $ 3.10 19%
=========== ========= ========== ========= =========== ==========
2
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:
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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 December 31, 2005, our "Same Store" portfolio consists of 1,260 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 2005.
The following table summarizes the pre-depreciation historical operating results
of the Same Store facilities:
SELECTED OPERATING DATA FOR THE SAME STORE
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FACILITIES (1,260 FACILITIES):
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Three Months Ended December 31, Year Ended December 31,
---------------------------------------- ----------------------------------------
Percentage Percentage
2005 2004 Change 2005 2004 Change
----------- ----------- ---------- ----------- ----------- -----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income, net of discounts............ $ 197,071 $ 188,166 4.7% $ 775,012 $ 740,619 4.6%
Late charges and administrative fees
collected.......................... 9,217 8,254 11.7% 36,028 32,566 10.6%
----------- ----------- ---------- ----------- ----------- -----------
Total revenues (a)......................... 206,288 196,420 5.0% 811,040 773,185 4.9%
Cost of operations:
Payroll expense............................ 20,070 22,285 (9.9)% 81,981 83,434 (1.7)%
Property taxes ............................ 16,731 16,658 0.4% 73,547 71,393 3.0%
Advertising and promotion.................. 5,778 6,620 (12.7)% 23,518 22,022 6.8%
Repairs and maintenance.................... 6,756 6,787 (0.5)% 25,840 25,821 0.1%
Utilities.................................. 4,141 3,668 12.9% 16,972 15,798 7.4%
Property insurance......................... 1,922 2,037 (5.6)% 8,067 8,960 (10.0)%
Telephone reservation center............... 1,908 2,232 (14.5)% 7,884 10,599 (25.6)%
Other costs of management.................. 7,735 7,058 9.6% 30,160 28,517 5.8%
----------- ----------- ---------- ----------- ----------- -----------
Total cost of operations (a)................. 65,041 67,345 (3.4)% 267,969 266,544 0.5%
----------- ----------- ---------- ----------- ----------- -----------
Net operating income (before depreciation) .... $ 141,247 $ 129,075 9.4% $ 543,071 $ 506,641 7.2%
=========== =========== ========== =========== =========== ===========
Gross margin................................... 68.5% 65.7% 4.3% 67.0% 65.5% 2.3%
Weighted average for the period:
Square foot occupancy (b).................... 90.5% 90.8% (0.3)% 91.0% 91.0% 0.0%
Realized annual rent per occupied square
foot (c)..................................... $ 11.88 $ 11.31 5.0% $ 11.62 $ 11.10 4.7%
REVPAF (d)................................... $ 10.75 $ 10.27 4.7% $ 10.57 $ 10.10 4.7%
Weighted average at December 31:
Square foot occupancy........................ 89.8% 90.1% (0.3)%
In place annual rent per occupied square
foot (e)..................................... $ 12.84 $ 12.21 5.2%
Total net rentable square feet (in thousands).. 73,311 73,311 -
a) See attached reconciliation of these amounts to our consolidated
self-storage revenues and operating expenses. Revenues and cost of
operations do not include ancillary revenues and expenses generated at the
facilities with respect to tenant reinsurance, retail sales and truck
rentals. "Other costs of management" included in cost of operations
principally represents all the indirect costs incurred in the operations of
the facilities. Indirect costs principally include supervisory costs and
corporate overhead cost incurred to support the operating activities of the
facilities.
3
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 it is useful in evaluating 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.
The growth in rental income in 2006 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
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March 31 June 30 September 30 December 31 Full Year
------------ ----------- ------------ ------------ ------------
Media advertising expense (in 000's):
2004..................................... $ 3,290 $ 1,956 $ 1,988 $ 3,060 $ 10,294
2005..................................... $ 3,522 $ 2,940 $ 2,309 $ 2,141 $ 10,912
REVPAF:
2004..................................... $ 9.77 $ 10.06 $ 10.31 $ 10.27 $ 10.10
2005..................................... $ 10.25 $ 10.51 $ 10.77 $ 10.75 $ 10.57
Weighted average realized annual rent per
occupied square foot for the period:
2004..................................... $ 10.90 $ 10.99 $ 11.22 $ 11.31 $ 11.10
2005..................................... $ 11.41 $ 11.41 $ 11.74 $ 11.88 $ 11.62
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% 91.7% 90.5% 91.0%
EFFECTS OF HURRICANES:
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As previously reported, in August 2005, all eight of our facilities located in
New Orleans were damaged as a result of Hurricane Katrina. All of the facilities
were closed for operations for several weeks following the hurricane; however,
all but three of these facilities have since reopened. Two of the three
facilities that remain closed will not be able to reopen at all without
substantial restoration and repair work.
During the quarter ended December 31, 2005, our net operating income (before
depreciation) for these eight facilities was $494,000 compared to $1,116,000 for
the same period last year, a reduction of $622,000 or 56%. For the year ended
December 31, 2005, net operating income (before depreciation) was $3,005,000 as
compared to $4,013,000 for the same period in 2004, a decrease of $1,008,000 or
25%. Included in the caption "Casualty Loss" for the quarter and year ended
December 31, 2005 is estimated business interruption income approximating
$675,000, representing our estimated recovery from our insurers for loss of
business through December 31, 2005.
Notwithstanding that five of our facilities in New Orleans are currently
operating, we believe that the indirect economic effects of the hurricane on the
city may have a negative impact on our facilities' operating results and are
expected to continue for an indeterminate time period.
On October 24, 2005, Hurricane Wilma struck Southern Florida, where we sustained
damage to 74 of our facilities. All of our facilities, including the damaged
facilities, were placed back into operation soon after and the impact to our
operating results for the fourth quarter of 2005 was not significant.
We have third-party insurance coverage, subject to certain deductibles, that
covers restoration of physical damage to our facilities. We also have business
interruption insurance, subject to certain deductibles, that principally covers
loss of income due to units being offline as a result of physical damage. Loss
of income occasioned entirely by indirect economic effects is generally not
covered.
We estimate that the aggregate cost to restore our facilities damaged in these
hurricanes will be approximately $10.7 million. We expect our insurers to pay
for approximately $3.5 million of these costs. We recorded a casualty loss with
respect to the damage to our self-storage facilities amounting to approximately
$2,592,000 during the year ended December 31, 2005, which represents the excess
of the net book value of assets damaged over the insurance proceeds we expect to
receive. We recorded similar casualty losses during the year ended December 31,
2004 of $1,250,000.
4
The above estimates are subject to change as we and our insurers (i) more fully
evaluate the extent of physical damage, which may not be fully determinable
until commencement of demolition, (ii) develop detailed restoration plans and
(iii) evaluate the impact of local conditions in the building labor and supplies
markets on restoration costs. In addition, we have not yet determined whether
restoration of the two most significantly damaged facilities in New Orleans will
be economically viable; however, if we did not restore these facilities we could
apply the insurance proceeds towards the development of facilities in other
locations.
Our tenant insurance subsidiary reinsures policies against claims for losses to
goods stored by tenants in our facilities, for tenants who elect such coverage.
Included in cost of operations for tenant reinsurance for the fourth quarter of
2005 is $500,000 ($1,000,000 for the year ended December 31, 2005) in estimated
losses with respect to tenant claims as a result of damage sustained from the
impact of both Hurricanes Katrina and Wilma. During 2004, we recorded $1.5
million for estimated losses from tenant claims for the series of hurricanes
that occurred during the third quarter of 2004.
DEVELOPMENT, ACQUISITION AND DISPOSITION ACTIVITIES:
- ----------------------------------------------------
During the fourth quarter of 2005, we opened three newly developed facilities at
a cost of $20.9 million containing 204,000 net rentable square feet. We also
completed five projects whereby we converted space at former containerized
storage facilities into self-storage space at a total cost of $10.0 million,
adding an aggregate 386,000 net rentable square feet of self-storage space.
Additionally, four expansion projects added 190,000 net rentable square feet at
a cost of $12.4 million.
At December 31, 2005, there were 62 projects that were either under construction
or were expected to begin construction generally within the next year, comprised
of four newly developed self-storage facilities (338,000 net rentable square
feet) with a total estimated cost of $61.2 million, 51 projects (3,020,000 net
additional rentable square feet) which expand existing self-storage facilities
and enhance their visual appeal for a total estimated cost of $240.3 million,
and seven projects (553,000 net rentable square feet) to convert space at former
containerized storage facilities into self-storage space for a total estimated
cost of $21.7 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 fourth quarter of 2005, we acquired 11 facilities from third parties,
with an aggregate of 920,000 net rentable square feet, for an aggregate cost of
approximately $130 million in cash. These acquisitions were funded entirely by
us.
In addition to the facilities acquired in the quarter ended December 31, 2005,
between January 1 and February 6, 2006 we acquired two additional facilities
with 112,000 net rentable square feet for approximately $14 million including
assumption of debt on one of these facilities totaling $4.6 million. At February
6, 2006, we are under contract to acquire seven additional facilities (total
approximate net rentable square feet of 527,000) at an aggregate cost of
approximately $67 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.
On August 5, 2005 we acquired the third party institutional investor's
partnership interest in PSAC Storage Investors, LLC for approximately $41.4
million in cash. The institutional investor along with Mr. Hughes, the Company's
Chairman of the Board, were partners in PSAC Storage Investors, LLC, a
partnership that owned an interest in our consolidated development joint
venture. As a result of the acquisition, we began consolidating the accounts of
PSAC Storage Investors, LLC, during the third quarter of 2005. In addition, the
acquisition allowed us to terminate the partnership and the development joint
venture as of November 17, 2005, and on that date we acquired Mr. Hughes'
interest in PSAC Storage Investors, LLC for approximately $64.5 million,
pursuant to the terms of the partnership agreement.
ISSUANCE AND REDEMPTION OF PREFERRED SECURITIES:
- ------------------------------------------------
On November 29, 2005, we called for redemption our 8.60% Cumulative Preferred
Stock, Series Q with a redemption value of $172,500,000, plus accrued dividends.
These shares were subsequently redeemed on January 19, 2006. We recognized EITF
Topic D-42 charges totaling $5,634,000 for the three months ended December 31,
2005 with respect to this redemption.
On December 12, 2005, we issued 4,000,000 depositary shares, with each
depositary share representing 1/1,000 of a share of 7.00% Cumulative Preferred
Stock, Series G. The offering resulted in $100 million of gross proceeds.
On January 19, 2006, we issued 4,000,000 depositary shares, with each depositary
share representing 1/1,000 of a share of 6.95% Cumulative Preferred Stock,
Series H. The offering resulted in $100 million of gross proceeds. On January
27, 2006, we issued an additional 200,000 depository shares, with each
depositary share representing 1/1,000 of a share of our 6.95% Cumulative
Preferred Stock, Series H resulting in $5 million of gross proceeds.
5
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. As of June 30, 2005, we
have repurchased a total of 22,201,720 shares of our common stock. No additional
shares were repurchased between July 1, 2005 and February 6, 2006.
FOURTH QUARTER AND YEAR END CONFERENCE CALL:
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A conference call is scheduled for Tuesday, February 7, 2006 at 7:30 a.m. (PST)
to discuss the fourth quarter and year end 2005 earnings results. The
participant toll free number is (877) 516-1540 (conference ID number 4983877). A
simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations"
(conference ID number 4983877). A replay of the conference call may be accessed
through February 14, 2006 by calling (800) 642-1687 or by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations." Both
forms of replay utilize conference ID number 4983877.
ABOUT PUBLIC STORAGE, INC.:
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Public Storage, Inc., an S&P 500 company, 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 December 31, 2005 the Company had
interests in 1,501 storage facilities with approximately 92 million net rentable
square feet.
Additional information about Public Storage, Inc. is available on our website,
www.publicstorage.com
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FORWARD LOOKING STATEMENTS:
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All statements in this press release, other than statements of historical fact,
are forward-looking statements which may be identified by the use of the words
"expects," "believes," "anticipates," "should," "estimates" and similar
expressions. These forward-looking statements involve known and unknown risks
and uncertainties, which may cause Public Storage's actual results and
performance to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact future results and
performance are described from time to time in Public Storage's filings with the
Securities and Exchange Commission, including in Item 1A, "Risk Factors" in
Public Storage's Annual Report on Form 10-K for the fiscal year ended December
31, 2004, and in subsequent reports on Form 10-Q and Form 8-K. These risks
include, but are not limited to, the following: changes in general economic
conditions and in the markets in which Public Storage operates; the impact of
competition from new and existing storage and commercial facilities and other
storage alternatives, which could impact rents and occupancy levels at our
facilities; difficulties in Public Storage's ability to evaluate, finance and
integrate acquired and developed properties into its existing operations and to
fill up those properties, which could adversely affect Public Storage'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 our expenses and
reduce cash available for distribution; consumers' failure to accept the
containerized storage concept which would reduce our profitability; difficulties
in raising capital at reasonable rates, which would impede Public Storage's
ability to grow; delays in the development process, which could adversely affect
profitability; economic uncertainty due to the impact of war or terrorism could
adversely affect its business plan; and risks related to Public Storage's
proposal to acquire Shurgard Storage Centers, Inc. Public Storage disclaims any
obligation to update publicly or otherwise revise any forward-looking
statements, whether as a result of new information, new estimates, or other
factors, events or circumstances after the date of this press release, except
where expressly required by law.
Additional financial data attached.
6
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
---------------------------- ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
(In thousands, except per share data)
Revenues:
Rental income:
Self-storage facilities (a)...................... $ 245,650 $ 224,289 $ 952,284 $ 862,809
Commercial properties (a)........................ 2,867 2,686 11,560 10,750
Containerized storage facilities (a)............. 4,192 4,256 16,497 19,355
Ancillary operations (b)........................... 15,383 14,285 64,173 60,996
Interest and other income.......................... 5,470 1,902 16,447 5,391
------------- ------------- ------------- --------------
273,562 247,418 1,060,961 959,301
------------- ------------- ------------- --------------
Expenses:
Cost of operations:
Self-storage facilities (a)...................... 78,490 76,727 320,919 300,680
Commercial properties (a)........................ 1,156 1,128 4,448 4,328
Containerized storage facilities (a)............. 3,194 3,033 12,886 11,774
Ancillary operations (b)......................... 8,248 9,704 40,378 45,487
Depreciation and amortization...................... 52,261 47,616 196,397 183,063
General and administrative......................... 4,225 2,830 21,115 18,813
Interest expense................................... 2,288 660 8,216 760
------------- ------------- ------------- --------------
149,862 141,698 604,359 564,905
------------- ------------- ------------- --------------
Income from continuing operations before equity in
earnings of real estate entities and minority
interest in income................................. 123,700 105,720 456,602
394,396
Equity in earnings of real estate entities (d)...... 4,501 10,918 24,883 22,564
Casualty loss........................................ (1,721) - (1,917) (1,250)
Minority interest in income:
Allocable to preferred minority interests:
Based upon ongoing distributions................... (3,591) (5,516) (16,147) (22,423)
Special distribution and EITF Topic D-42 allocation
(c)................................................ - - (874) (10,063)
Other partnership interests .......................... (2,705) (4,499) (15,630) (17,427)
------------- ------------- ------------- --------------
Income from continuing operations...................... 120,184 106,623 446,917 365,797
Gain on disposition of real estate................. 3,188 31 3,099 1,317
Discontinued operations (a)........................ - 617 6,377 (901)
------------- ------------- ------------- --------------
Net income $ 123,372 107,271 $ 456,393 $ 366,213
============= ============= ============= ==============
Net income allocation:
- ----------------------
Allocable to preferred shareholders:
Based on distributions paid...................... $ 46,731 $ 40,632 $ 173,017 $ 157,925
Based on redemptions of preferred stock.......... 5,634 1,929 7,538 8,724
Allocable to equity shareholders, Series A......... 5,356 5,375 21,443 21,501
Allocable to common shareholders................... 65,651 59,335 254,395 178,063
------------- ------------- ------------- --------------
$ 123,372 $ 107,271 $ 456,393 $ 366,213
============= ============= ============= ==============
Per common share:
Net income per share - Diluted..................... $ 0.51 $ 0.46 $ 1.97 $ 1.38
============= ============= ============= ==============
Net income per share - Basic....................... $ 0.51 $ 0.46 $ 1.98 $ 1.39
============= ============= ============= ==============
Weighted average common shares - Diluted........... 128,743 129,088 128,819 128,681
============= ============= ============= ==============
Weighted average common shares - Basic............. 128,063 128,438 128,159 127,836
============= ============= ============= ==============
(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 year ended December 31, 2005. Discontinued operations for the year
ended December 31, 2005, includes a gain of $5,180,000 relating to the
condemnation of a self-storage facility pursuant to an eminent domain
proceeding.
(b) Ancillary operations include tenant reinsurance, merchandise sales, and
truck rentals at our self-storage facilities, as well as management of
facilities owned by third-party owners and facilities owned by the
Unconsolidated Entities.
7
(c) 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
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 for the year ended December 31,
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.
(d) Included in equity in earnings for the twelve months ended December 31,
2005 and 2004, is our share of PSB's EITF Topic D-42 charges totaling
approximately $131,000 and $2,171,000, respectively (none during either of
the three month periods then ended).
8
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
December 31, December 31,
2005 2004
------------------- -----------------
(Unaudited)
(In thousands, except share and per
share data)
ASSETS
Cash and cash equivalents .................................... $ 493,501 $ 366,255
Operating real estate facilities:
Land and building, at cost................................. 5,930,484 5,510,750
Accumulated depreciation................................... (1,500,128) (1,320,200)
------------------- -----------------
4,430,356 4,190,550
Construction in process....................................... 54,472 56,160
------------------- -----------------
4,484,828 4,246,710
Investment in real estate entities............................ 328,555 341,304
Goodwill...................................................... 78,204 78,204
Intangible assets, net........................................ 98,081 104,685
Other assets.................................................. 69,317 67,632
------------------- -----------------
Total assets........................................... $ 5,552,486 $ 5,204,790
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable................................................. $ 113,950 $ 129,519
Debt to joint venture partner................................. 35,697 16,095
Preferred stock called for redemption......................... 172,500 54,875
Accrued and other liabilities................................. 159,360 145,431
------------------- -----------------
Total liabilities...................................... 481,507 345,920
Minority interest - preferred................................. 225,000 310,000
Minority interest - other..................................... 28,970 118,903
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized,
- ------------------------------------------------------------------
1,698,336 shares issued (in series) and outstanding (3,980,186 at
December 31, 2004), at liquidation preference:
Cumulative Preferred Stock, issued in series............. 2,498,400 2,102,150
Common Stock, $0.10 par value, 200,000,000 shares authorized,
128,089,563 shares issued and outstanding (128,526,450 at
December 31, 2004)....................................... 12,809 12,853
Equity Stock, Series A, $0.01 par value, 200,000,000 shares
authorized, 8,744.193 shares issued and outstanding
(8,776.102 at December 31, 2004) ........................ - -
Paid-in capital............................................ 2,430,671 2,457,568
Cumulative net income...................................... 3,189,266 2,732,873
Cumulative distribution paid............................... (3,314,137) (2,875,477)
------------------- -----------------
Total shareholders' equity............................... 4,817,009 4,429,967
------------------- -----------------
Total liabilities and shareholders' equity............. $ 5,552,486 $ 5,204,790
=================== =================
9
Selected Financial Data
Computation of Funds from Operations (a)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
--------------------------- ------------------------
2005 2004 2005 2004
------------- ------------ ------------ -----------
(Amounts in thousands, except per share data)
Computation of Funds from Operations (FFO) allocable to Common
Stock
Net income..................................................... $ 123,372 $ 107,271 $ 456,393 $ 366,213
Add back - depreciation and amortization................... 52,261 47,616 196,397 183,063
Add back - depreciation and amortization included in
Discontinued Operations................................ - 109 88 1,282
Add back - our pro rata share of depreciation from equity
investments............................................ 9,160 8,665 35,425 33,720
Eliminate - depreciation with respect to non-real estate (56) (996) (1,789) (4,252)
assets.................................................
Eliminate - our pro rata share of gain on sale of real
estate included in equity of earnings of real estate
entities............................................... (694) (6,653) (7,858) (6,715)
Eliminate - gain on sale of real estate.................... (3,188) (31) (3,099) (1,317)
Eliminate - gain on sale of real estate assets included in
discontinued operations................................ - (971) (5,180) (971)
Add back - minority interest share of income............... 6,296 10,015 32,651 49,913
------------- ------------ ------------ -----------
Consolidated FFO............................................... 187,151 165,025 703,028 620,936
Allocable to preferred minority interest:
Based upon ongoing distributions (b)....................... (3,591) (5,516) (16,147) (22,423)
Special distribution and EITF Topic D-42 allocation (b).... - - (874) (10,063)
Allocable to minority interest - other partnership interests... (2,711) (5,694) (18,782) (23,473)
------------- ------------ ------------ -----------
Remaining FFO allocable to our shareholders.................... 180,849 153,815 667,225 564,977
Less: allocations to preferred and equity stock shareholders:
Preferred shareholder distributions........................ (46,731) (40,632) (173,017) (157,925)
Issuance costs on redeemed preferred shares................ (5,634) (1,929) (7,538) (8,724)
Equity Stock, Series A distributions....................... (5,356) (5,375) (21,443) (21,501)
------------- ------------ ------------ -----------
Remaining FFO allocable to our common shareholders (a)......... $ 123,128 $ 105,879 $ 465,227 $ 376,827
============= ============ ============ ===========
Weighted average common shares outstanding:
Common shares outstanding.................................. 128,063 128,438 128,159 127,836
Weighted average stock options and restricted stock units
outstanding using treasury method.......................... 680 650 660 845
------------- ------------ ------------ -----------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share............................. 128,743 129,088 128,819 128,681
============= ============ ============ ===========
FFO per common share (a) (c)................................... $ 0.96 $ 0.82 $ 3.61 $ 2.93
============= ============ ============ ===========
(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 for the year ended December 31,
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 year ended December 31, 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.
10
Public Storage, Inc.
Selected Financial Data
Computation of Funds Available for Distribution (b)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------ -------------------------
2005 2004 2005 2004
----------- ----------- ------------ -----------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to our common shareholders (a)............. $ 123,128 $ 105,879 $ 465,227 $ 376,827
Add: Stock-based compensation expense.................... 1,179 848 4,758 2,963
Impact of application of EITF Topic D-42................. 5,634 1,929 8,412 10,787
EITF Topic D-42 charges included in equity in earnings of
real estate entities..................................... - - 131 2,171
Less: Capital expenditures to maintain facilities........ (12,604) (15,571) (25,890) (35,868)
----------- ----------- ------------ -----------
Funds available for distribution ("FAD") (b)............. $ 117,337 $ 93,085 $ 452,638 $ 356,880
=========== =========== ============ ===========
Distribution to common shareholders...................... $ 64,378 $ 58,360 $ 244,200 $ 230,834
=========== =========== ============ ===========
Distribution payout ratio (b)............................ 55% 63% 54% 65%
=========== =========== ============ ===========
(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.
11
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 Year Ended
December 31, December 31,
--------------------------- ----------------------------
2005 2004 2005 2004
------------- ------------ ------------- -------------
(Amounts in thousands)
Revenues for the 1,260 Same Store facilities......... $ 206,288 $ 196,420 $ 811,040 $ 773,185
Revenues for non-Same Store facilities (a): Development
facilities (year opened):
2001 and 2002................................. 5,614 5,167 21,745 19,050
2003.......................................... 3,379 2,799 12,789 8,705
2004.......................................... 1,577 688 5,336 1,234
2005.......................................... 260 - 464 -
Acquisition facilities (year acquired):
2004.......................................... 8,030 4,610 30,406 4,705
2005.......................................... 4,660 - 9,285 -
Expansion facilities............................. 11,297 10,742 44,280 41,695
Combination facilities........................... 4,545 3,863 16,939 14,235
------------- ------------ ------------- -------------
Consolidated self-storage revenues (b)................. $ 245,650 $ 224,289 $ 952,284 $ 862,809
============= ============ ============= =============
Cost of operations for the 1,260 Same Store facilities. $ 65,041 $ 67,345 $ 267,969 $ 266,544
Cost of operations for non-Same Store facilities (a):
Development facilities (year opened):
2001 and 2002................................. 1,913 1,630 7,806 7,464
2003.......................................... 925 487 4,071 3,788
2004.......................................... 365 357 2,068 1,149
2005.......................................... 264 - 568 -
Acquisition facilities (year acquired):
2004.......................................... 3,270 1,503 12,632 1,606
2005.......................................... 2,002 - 4,148 -
Expansion facilities............................. 3,392 3,866 15,332 14,430
Combination facilities........................... 1,318 1,539 6,325 5,699
------------- ------------ ------------- -------------
Consolidated self-storage cost of operations (b)....... $ 78,490 $ 76,727 $ 320,919 $ 300,680
============= ============ ============= =============
(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 December 31, 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.
12