SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 8, 2003
PUBLIC STORAGE, INC.
--------------------
(Exact name of registrant as specified in its charter)
California 1-8389 95-3551121
---------- ------ ----------
(State or Other Jurisdiction (Commission File Number) I.R.S. Employer
of Incorporation) Identification Number)
701 Western Avenue, Glendale, California 91201-2397
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
N/A
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits
c. Exhibits
99.1 Press Release dated May 8, 2003
Item 9. Regulation FD Disclosure
On May 8, 2003, the Company issued a press release announcing its
results for the quarter ended March 31, 2003. The Company is attaching
the press release as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this report on Form 8-K is being furnished
pursuant to Item 12 under Item 9 of Form 8-K as directed by the U.S.
Securities and Exchange Commission in Release No. 34-47583. The
information included pursuant to this Item 9 (including the exhibits)
shall not be deemed to be incorporated by reference into any filing
made by the Company pursuant to the Securities Act of 1933, other than
to the extent that such filing incorporates by reference any or all of
such information by express reference thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUBLIC STORAGE, INC.
Dated: May 8, 2003
By: /s/ Harvey Lenkin
-----------------
Harvey Lenkin
President
Exhibit 99.1
News Release
Public Storage, Inc.
701 Western Avenue
P.O. Box 25050
Glendale, CA 91221-5050
www.publicstorage.com
--------------------------------------------------------------------------------
For Release: Immediately
Date: May 8, 2003
Contact: Mr. Harvey Lenkin
(818) 244-8080
Glendale, California - Harvey Lenkin, President of Public Storage, Inc. (NYSE
and PCX:PSA), announced today operating results for the first quarter ended
March 31, 2003.
Operating Results for the Quarter Ended March 31, 2003:
-------------------------------------------------------
Net income for the three months ended March 31, 2003 was $76,639,000 compared to
$87,455,000 for the same period in 2002, representing a decrease of $10,816,000
or 12.4%. This decrease in net income is primarily a result of a reduction in
our Same Store operating results (as discussed below), increased depreciation
expense resulting primarily from new property additions, and a decrease in
equity in earnings of real estate entities. The decrease in equity in earnings
of real estate entities is primarily due to the reduction in earnings of PS
Business Parks, Inc., an unconsolidated affiliate in which we own approximately
a 45% interest at March 31, 2003. PS Business Parks, Inc.'s earnings for the
quarter ended March 31, 2003 were negatively impacted due to asset impairment
charges relating to the impending sale of real estate offset partially by a gain
on sale of real estate assets. Our net pro rata share of such items in the
quarter ended March 31, 2003 totaled approximately $2,130,000. In addition,
during the prior year's quarter ended March 31, 2002, PS Business Parks, Inc.
recognized a gain on the sale of real estate of which our pro rata share was
approximately $2,241,000. As a result of these items, our equity in earnings for
the first quarter of 2003 was negatively impacted a total of $4,371,000 as
compared to the first quarter of 2002.
Net income allocable to our regular common shareholders was $34,242,000 or $0.27
per common share on a diluted basis (based on 125,232,000 weighted average
diluted common equivalent shares) for the three months ended March 31, 2003
compared to $46,240,000 or $0.37 per common share on a diluted basis (based on
124,065,000 weighted average diluted common equivalent shares) for the same
period in 2002, representing a decrease of 25.9% in the aggregate or 27.0% on a
per share basis.
Weighted average diluted shares increased from 124,065,000 for the three months
ended March 31, 2002 to 125,232,000 for the three months ended March 31, 2003.
This increase was due primarily to the net issuance of 1,091,608 shares during
2002 in connection with the acquisition of the remaining partnership interests
in two entities in which the Company held a partial equity interest, as well as
the issuance of an aggregate of 1,091,767 shares during 2002 and 2003 in
connection with the exercise of employee stock options. This increase was offset
partially by the impact of a 965,000 share reduction in the dilutive impact of
stock options outstanding due to the exercise of employee stock options as well
as an overall decrease in our average stock price, which impacts the weighted
average calculation using the treasury stock method.
During the three months ended March 31, 2003 and 2002, we allocated $37,022,000
and $35,840,000 of our net income (based on distributions paid), respectively,
to our preferred shareholders, representing an increase of 3.3%. This increase
is due to the issuance of additional preferred securities throughout 2002,
offset partially by the redemption of several series of our higher coupon
preferred stock in 2002. In addition, during each of the three months ended
March 31, 2003 and 2002, we allocated $5,375,000 of our net income to our Equity
Stock, Series A shareholders.
Funds from Operations:
----------------------
Funds from operations per common share for the first quarter of 2003 was $0.68
per common equivalent share compared to $0.73 per common equivalent share for
the same period in 2002, representing a decrease of 6.8%. The reduction in funds
from operations per common share was primarily due to a reduction in our Same
Store operating results.
Funds from operations is a term defined by the National Association of Real
Estate Investment Trusts by which real estate investment trusts ("REITs") may be
compared. Funds from operations is a supplemental disclosure and it is generally
defined as net income before depreciation and extraordinary items and, in the
case of the Company, does not include gains or losses on the disposition of real
estate assets. See the attached reconciliation of net income to funds from
operations included in the selected financial data attached to this press
release.
Property Operations:
--------------------
The Company derives substantially all of its revenues from the ownership and
management of self-storage facilities. In order to evaluate the performance of
the Company's overall self-storage portfolio, management analyzes the operating
performance of a consistent group of self-storage facilities.
These facilities consist of 1,258 self-storage facilities, representing
approximately 89% of the 1,406 self-storage facilities in which the Company has
an ownership interest (the 1,258 self-storage facilities herein referred to as
the "Same Store" facilities). The Same Store facilities have been operated on a
stabilized basis under the "Public Storage" name since January 1, 2000 and
include 1,226 facilities which are consolidated by the Company and 32 facilities
owned by unconsolidated entities in which the Company has an investment.
The following table summarizes the pre-depreciation historical operating results
of the Same Store facilities:
Selected Operating Data for the Same Store Facilities (1,258
-------------------------------------------------------------
Facilities):
------------ For the three months ended March 31,
------------------------------------
Percentage
2003 2002 Change
---------- ---------- ----------
(Dollar amounts in thousands,
except weighted average data)
Rental income:
Base rental income............................................... $ 180,772 $ 176,112 2.6%
Promotional discounts............................................ (11,069) (1,117) 891.0%
---------- ---------- ----------
Adjusted base rental income ..................................... 169,703 174,995 (3.0)%
Late charges and administrative fees collected................... 6,940 5,560 24.8%
---------- ---------- ----------
Total rental income (a).......................................... 176,643 180,555 (2.2)%
Cost of operations:
Property taxes................................................. 17,759 16,999 4.5%
Direct property payroll........................................ 15,033 13,443 11.8%
Cost of managing facilities.................................... 5,454 5,483 (0.5)%
Utilities...................................................... 4,160 4,141 0.5%
Repairs and maintenance........................................ 4,022 3,468 16.0%
Advertising and promotion...................................... 3,864 2,827 36.7%
Telephone reservation center................................... 2,398 2,261 6.1%
Property insurance............................................. 1,510 1,419 6.4%
Other.......................................................... 4,512 4,118 9.6%
---------- ---------- ----------
Total cost of operations (a)..................................... 58,712 54,159 8.4%
Net operating income prior to depreciation.......................... $ 117,931 $ 126,396 (6.7)%
========== ========== ==========
Gross margin........................................................ 66.8% 70.0% (4.6)%
Weighted average for the period:
Square foot occupancy (b)........................................ 84.9% 83.6% 1.6%
Realized annual rent per occupied square foot (c)................ $ 10.96 $ 11.48 (4.5)%
REVPAR (d)....................................................... $ 9.30 $ 9.59 (3.0)%
Weighted average at March 31:
Square foot occupancy............................................ 85.4% 83.5% 2.3%
In place annual rent per occupied square foot (e)................ $ 11.96 $ 11.73 2.0%
Posted annual rent per square foot (f)........................... $ 12.12 $ 11.44 5.9%
Total net rentable square feet (in thousands)....................... 72,961 72,961 0.0%
(a) See attached reconciliation of these amounts to the Company's consolidated
self-storage revenues and operating expenses.
(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 adjusted base rental income by the weighted average occupied
square footage for the period. Realized rents per square foot takes into
consideration promotional discounts, bad debt costs, credit card fees and
other costs which reduce rental income from the contractual amounts due.
(d) Annualized revenue per available square foot ("REVPAR") represents
annualized adjusted base rental income divided by total available net
rentable square feet.
(e) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
(f) Posted annual rent per square foot represents the rents charged to new
tenants without reductions for any promotional discounts.
During the first quarter of 2003, net operating income for the Same Store
facilities decreased 6.7% as compared to the same period in 2002, due to the
following:
o REVPAR decreased 3.0% from $9.59 per square foot in the first quarter
of 2002 to $9.30 for the first quarter of 2003. This was attributable
to a 4.5% decrease in realized annual rents per occupied square foot
from $11.48 in the first quarter of 2002 to $10.96 for the first
quarter of 2003. This decrease is attributable primarily to a
significant increase in promotional discounts given to incoming tenants
from $1,117,000 for the first quarter of 2002 to $11,069,000 for the
first quarter of 2003. The reduction in realized rents was offset
partially by a 1.6% increase in weighted average occupancy levels, from
83.6% in the first quarter of 2002 to 84.9% for the first quarter of
2003.
o Total operating expenses increased 8.4%. The 8.4% increase in cost of
operations is primarily due to increases in payroll, advertising and
promotion, property tax and repairs and maintenance costs. Direct
property payroll increased 11.8% due primarily to increased incentives
to property operating personnel. Advertising and promotion increased
36.7% primarily due to increased television advertising expense, which
totaled $1,699,000 in the first quarter of 2003 as compared to $544,000
during the same period in 2002. Repairs and maintenance increased 16.0%
primarily due to increased snow removal expenses totaling $513,000.
Outlook:
--------
We expect to continue promotional discounting and television advertising during
the remainder of 2003, though the level of such activities cannot be estimated
at this time. The up front costs of these marketing activities, and the
increases in discounts, are expected to continue to adversely impact our net
operating income during 2003. The following table summarizes additional selected
financial data with respect to our Same Store facilities:
For the three months ended
------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 Full Year
---------- ---------- ---------- ---------- ----------
Promotional Discounts (in 000's):
2002............................... $1,117 $5,887 $5,157 $7,993 $20,154
2003............................... 11,069
Television advertising expense (in 000's):
2002............................... $ 544 $1,526 $2,152 $4,260 $ 8,482
2003............................... 1,699
REVPAR:
2002............................... $9.59 $9.48 $9.76 $9.34 $9.54
2003............................... $9.30
Weighted average realized annual rent per
occupied square foot for the period:
2002............................... $11.48 $10.97 $11.36 $10.98 $11.20
2003............................... $10.96
Weighted average occupancy levels for the period:
2002............................... 83.6% 86.4% 85.9% 85.1% 85.2%
2003............................... 84.9%
Weighted average occupancy at April 30,
2002............................... 85.5%
2003............................... 86.7%
As indicated in the above table, the weighted average occupancy level for our
Same Store facilities was 86.7% at April 30, 2003 as compared to 85.5% at April
30, 2002, representing an increase of 1.4%. This increase, however, has come at
a significant cost; as promotional discounts and television advertising cost are
expected to be higher in the second quarter of 2003 as compared to the second
quarter of 2002.
Property Development and Acquisitions:
--------------------------------------
During the first quarter of 2003, we opened 5 newly developed self-storage
facilities (347,000 net rentable square feet), at a total cost of approximately
$33.7 million.
At March 31, 2003, there are 40 projects that are in construction or are
expected to begin construction generally by September 30, 2003, which includes
new developments and expansions to existing self-storage facilities. These 40
projects, which will be fully funded by the Company, have total estimated costs
of approximately $169.2 million, of which $75.8 million had been spent through
March 31, 2003, with opening dates estimated through the next 12 - 24 months.
The development of these facilities is subject to significant contingencies.
In addition, the Company has nine parcels of land with a total book value of
$17.8 million that the Company is holding for development or sale.
No facilities were acquired during the first quarter of 2003.
Anticipated Property Dispositions:
----------------------------------
In the first quarter of 2003, management adopted a plan to exit the Knoxville,
Tennessee market, a market that the Company does not deem to be strategic. The
Company owns four self-storage facilities in this market, and has placed these
facilities, with a book value of $6.1 million, for sale. In addition, the
Company has listed for sale an industrial facility (book value of $9.3 million)
that was previously used by our containerized storage business. In the case of
each property, market value exceeds book value.
The disposition of these facilities is subject to significant contingencies,
however, we expect that any sales would be consummated within the next year. The
operating results of these facilities for previous and current periods are
reflected in the line item "Discontinued Operations" on the Company's income
statement.
Containerized Storage Business:
-------------------------------
As previously announced, management adopted a business plan in 2002 that
included the closure of 22 non-strategic containerized storage facilities (the
"Closed Facilities"). As of March 31, 2003, seven of the Closed Facilities
remained open, however, they are in the process of closing which may take up to
several months to complete. These facilities generated operating losses totaling
$97,000 in the first quarter of 2003. We expect that these facilities will
continue to generate operating losses during 2003 until final closure.
As previously announced, during the first quarter of 2003, we started to
reposition the containerized storage product vis-a-vis our self-storage product.
In part of this repositioning, we significantly increased rental rates per
customer and delivery rates. The ultimate impact of these actions on our
containerized storage occupancies, revenues, and net operating income is
uncertain at this time.
No additional facilities were closed in the first quarter of 2003; however,
management continues to evaluate the optimum level of containerized facility
operations in each market in which it operates.
Redemption of Preferred Equity:
-------------------------------
On March 31, 2003, we redeemed all 2,300,000 shares ($57.5 million) of our 9.2%
Cumulative Preferred Stock, Series B (NYSE:PSAPrB) at a redemption price of
$25.00 per share, plus a sum equal to all accrued and unpaid dividends from
January 1, 2003 through the redemption date.
Acquisition of Partnership Interests in PS Partners IV, Ltd.:
-------------------------------------------------------------
On April 28, 2003 the Company acquired through a merger all of the remaining
limited partnership interest not currently owned by the Company in PS Partners
IV, Ltd., a partnership which is consolidated with the Company. The acquisition
cost consisted of approximately 427,000 shares of Public Storage common stock
and approximately $10 million in cash.
Distributions Declared:
-----------------------
As previously announced, on May 8, 2003, the Board of Directors declared a
quarterly distribution of $0.45 per regular common share and $0.6125 per share
on the depositary shares each representing 1/1,000 of a share of Equity Stock,
Series A. Distributions were also declared with respect to the Company's various
series of preferred stock. All of the distributions are payable on June 30, 2003
to shareholders of record as of June 16, 2003.
First Quarter Conference Call:
------------------------------
As previously announced, a conference call is scheduled for Friday, May 9, 2003,
at 9:00 a.m. (PDT) to discuss these results. The toll free number is (877)
516-1540, the conference ID is 9576129. An instant replay of the conference call
will be available through May 16, 2003 at (800) 642-1687 or (706) 645-9291, the
conference ID is 9576129.
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 is located in
Glendale, California. The Company's self-storage properties are located in 37
states. At March 31, 2003 the Company had interests in 1,406 storage facilities.
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 21F 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, 2002, "Risk Factors," and include changes
in general economic conditions and in the markets 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 March 31, 2003, which will be
certified by the Company's CEO, President, 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.
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
(Unaudited)
For the Three Months Ended
March 31,
------------------------------------
2003 2002
---------------- ----------------
(in thousands, except per share data)
Revenues:
Rental income:
Self-storage facilities (a)............. $ 189,571 $ 188,525
Commercial properties (a)............... 2,846 2,956
Containerized storage facilities (a).... 9,481 8,198
Tenant reinsurance premiums................. 5,215 4,575
Interest and other income................... 1,699 1,708
---------------- ----------------
208,812 205,962
---------------- ----------------
Expenses:
Cost of operations:
Self-storage facilities (a)............. 65,315 58,439
Commercial properties (a)............... 1,193 1,092
Containerized storage facilities (a).... 6,377 5,957
Tenant reinsurance...................... 2,699 2,293
Depreciation and amortization............... 45,920 43,399
General and administrative.................. 4,250 4,000
Interest expense............................ 453 1,102
---------------- ----------------
126,207 116,282
---------------- ----------------
Income before equity in earnings, minority
interest in income, discontinued operations,
and gain on disposition of real estate..... 82,605 89,680
---------------- ----------------
Equity in earnings of real estate entities (b). 4,687 9,256
Minority interest in income:
Preferred partnership interests............. (6,726) (6,726)
Other partnership interests................. (3,942) (4,616)
---------------- ----------------
Income before discontinued operations and gain on
disposition of real estate.................. 76,624 87,594
Discontinued operations - containerized storage (97) (310)
(a)
Discontinued operations - commercial and
self-storage property operations (a)........ 98 171
Gain on disposition of real estate............. 14 -
---------------- ----------------
Net income..................................... $ 76,639 $ 87,455
================ ================
Net income allocation:
Allocable to preferred shareholders.......... $ 37,022 $ 35,840
Allocable to equity shareholders, Series A... 5,375 5,375
Allocable to common shareholders............. 34,242 46,240
---------------- ----------------
$ 76,639 $ 87,455
================ ================
Per common share:
Net income per share - Basic................. $0.28 $0.38
================ ================
Net income per share - Diluted............... $0.27 $0.37
================ ================
Weighted average common shares - Basic (c)... 124,078 121,946
================ ================
Weighted average common shares - Diluted..... 125,232 124,065
================ ================
(a) The historical operations of a commercial facility that the Company
disposed of in the fourth quarter of 2002, four self-storage facilities
that the Company entered into a plan to sell in the first quarter of 2003,
and 22 containerized storage facilities that the Company has closed or is
in the process of closing are classified as Discontinued Operations.
(b) The decrease in equity in earnings of real estate entities is due primarily
to an asset impairment loss recorded by PS Business Parks, Inc. with
respect to the impending disposition of real estate assets in the first
quarter of 2003 offset partially by a gain on sale of real estate assets.
Our net pro rata share of these items is $2,130,000. In addition, PS
Business Parks, Inc. recognized a gain on the disposition of real estate in
the first quarter of 2002, of which our pro rata share is $2,241,000.
(c) The increase in weighted average common shares - basic was due primarily to
the net issuance of 1,091,608 shares during 2002 in connection with the
acquisition of the remaining partnership interests in two entities in which
the Company held a partial equity interest, as well as the issuance of an
aggregate of 1,091,767 shares during 2002 and 2003 in connection with the
exercise of employee stock options.
PUBLIC STORAGE, INC.
SELECTED FINANCIAL DATA
March 31, December 31,
2003 2002
---------------- ----------------
(Unaudited)
(in thousands, except share
ASSETS and per share data)
------
Cash and cash equivalents.................................................... $ 55,017 $ 103,124
Operating real estate facilities:
Land and buildings, at cost............................................... 4,997,931 4,988,526
Accumulated depreciation.................................................. (1,024,002) (987,546)
---------------- ----------------
3,973,929 4,000,980
Construction in process..................................................... 75,781 87,516
Land and buildings held for sale, net of accumulated depreciation............ 15,421 -
Land held for development or sale............................................ 17,807 17,807
---------------- ----------------
4,082,938 4,106,303
Investment in real estate entities........................................... 331,557 329,679
Goodwill..................................................................... 78,204 78,204
Intangible assets, net....................................................... 116,242 117,893
Mortgage notes receivable from affiliates.................................... 24,281 24,324
Other assets................................................................. 76,955 84,135
---------------- ----------------
Total assets........................................................ $ 4,765,194 $ 4,843,662
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Notes payable................................................................ $ 89,111 $ 115,867
Borrowings on line of credit................................................. 25,000 -
Accrued and other liabilities................................................ 129,511 129,327
---------------- ----------------
Total liabilities................................................... 243,622 245,194
Minority interest - preferred................................................ 285,000 285,000
Minority interest - other.................................................... 153,401 154,499
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 6,958,486
shares issued and outstanding (9,258,486 at December 31, 2002), at
liquidation preference:
Cumulative Preferred Stock, issued in series........................ 1,759,525 1,817,025
Common Stock, $0.10 par value, 200,000,000 shares authorized, 124,134,290
shares issued and outstanding (116,991,455 at December 31, 2002)........ 12,413 11,699
Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
8,776.102 shares issued and outstanding at March 31, 2003 and December 31,
2002.................................................................... - -
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized, no shares
issued and outstanding (7,000,000 at December 31, 2002)................. - 700
Paid-in capital........................................................... 2,374,635 2,371,194
Cumulative net income..................................................... 2,106,646 2,030,007
Cumulative distributions paid............................................. (2,170,048) (2,071,656)
---------------- ----------------
Total shareholders' equity.......................................... 4,083,171 4,158,969
---------------- ----------------
Total liabilities and shareholders' equity..................... $ 4,765,194 $ 4,843,662
================ ================
Public Storage, Inc.
Selected Financial Data - Computation of Funds from Operations
and Funds Available for Distribution
(Unaudited)
For the Three Months Ended
March 31,
------------------------------
2003 2002
------------- -------------
(Amounts in thousands, except
per share data)
Computation of Funds from Operations ("FFO") per Share:
Net income...................................................... $ 76,639 $ 87,455
Depreciation and amortization............................... 45,920 43,399
Depreciation and amortization included in Discontinued Operations. 120 598
Less - Depreciation with respect to non-real estate assets.. (1,631) (1,613)
Gain on sale of real estate assets.......................... (14) -
Add - our share of PS Business Parks, Inc.'s loss (gain) on
sale of real estate...................................... 2,130 (2,241)
Depreciation from unconsolidated real estate investments.... 6,294 6,371
Minority interest in income................................. 10,668 11,342
------------- -------------
Consolidated funds from operations.............................. 140,126 145,311
Allocable to minority interests - other partnership interests... (5,588) (6,871)
Allocable to minority interest - preferred partnership
interests .................................................... (6,726) (6,726)
------------- -------------
Funds from operations allocable to our shareholders............. 127,812 131,714
Senior Preferred distributions.............................. (37,022) (35,840)
Equity Stock, Series A distributions........................ (5,375) (5,375)
------------- -------------
Less: preferred stock and equity stock dividends................ (42,397) (41,215)
------------- -------------
Funds from operations allocable to Common and Class B Common Stock (a) $ 85,415 $ 90,499
============= =============
Weighted average shares:
Regular common shares........................................ 124,078 115,156
Class B common stock......................................... - 7,000
Stock option dilution (b).................................... 1,154 2,119
------------- -------------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share.......................... 125,232 124,275
============= =============
FFO per common share (c)........................................ $ 0.68 $ 0.73
============= =============
Computation of Funds Available for Distribution ("FAD"):
Funds from operations allocable to Common and Class B Common Stock (a) $ 85,415 $ 90,499
Less: Capital expenditures to maintain facilities............... (2,333) (3,968)
------------- -------------
Funds available for distribution ("FAD") (d) .................. $ 83,082 $ 86,531
============= =============
Distributions to common and Class B Common shareholders......... $ 55,995 $ 55,045
============= =============
Distribution payout ratio (d).................................. 67.4% 63.6%
============= =============
------------------
(a) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts ("NAREIT") by which real estate investment
trusts ("REITs") may be compared. It is generally defined as net income
before depreciation and extraordinary items. FFO computations do not factor
out the REIT's requirement to make either capital expenditures or principal
payments on debt.
(b) The impact of employee options outstanding has decreased in the three
months ended March 31, 2003 as compared to the same period in 2002 due to a
decrease in the Company's average stock price (the Company determines the
dilutive impact of stock options based upon the treasury stock method),
combined with the exercise of employee stock options.
(c) FFO per share was negatively affected by dilution relating to the 71 newly
developed facilities opened by the Company or the Consolidated Development
Joint Venture since January 1, 1999. Based upon an average cost of capital
of 8%, this dilution amounted to approximately $0.04 and $0.03 for the
three months ended March 31, 2003 and 2002, respectively.
(d) Funds available for distribution ("FAD") is computed by deducting capital
expenditures to maintain facilities from FFO. Distribution payout ratio is
computed by dividing the quarter's distribution paid by FAD.
Public Storage, Inc.
Selected Financial Data
Reconciliation of Same Store Rental Income and Cost of Operations
To Consolidated Rental Income and Cost of Operations
(Unaudited)
For the Three Months Ended
March 31,
-----------------------------
2003 2002
------------- -------------
(Amounts in thousands)
Rental income for the 1,258 Same Store facilities.......... $ 176,643 $ 180,555
Less - rental income for Same Store facilities accounted
for on the equity method of accounting (a) ........... (5,392) (6,221)
Less - rental income for 4 facilities included in
discontinued operations (b).......................... (388) (382)
Add: rental income for other non Same Store facilities
(c).................................................. 18,708 14,573
------------- -------------
Consolidated self-storage rental income................ $ 189,571 $ 188,525
============= =============
Cost of operations for the 1,258 Same Store facilities..... $ 58,712 $ 54,159
Less - cost of operations for Same Store facilities
accounted for on the equity method of accounting (a) . (1,579) (1,656)
Less - cost of operations for 4 facilities included in
discontinued operations (b) ......................... (170) (156)
Add: cost of operations for other non Same Store
facilities (c)....................................... 8,352 6,092
------------- -------------
Consolidated self-storage cost of operations........... $ 65,315 $ 58,439
============= =============
(a) At March 31, 2003, the Company has a noncontrolling ownership
interest in 32 of the Same Store facilities, and until January
14, 2002, when the Company acquired the remaining interest it did
not own in these facilities, the Company had a noncontrolling
ownership interest in 26 of the Same Store facilities. The
revenues and cost of operations earned while the Company does not
have a controlling ownership interest are not included in the
Company's consolidated self-storage rental income and cost of
operations. Instead, the Company records its share of the net
operating results for these periods in its income statements as
"equity in earnings of real estate entities."
(b) The Company has entered into a plan to sell four of the Same
Store facilities and, accordingly, the net operating results of
these facilities is included in the Company's income statements
as "discontinued operations."
(c) The Company consolidates the operating results of additional
self-storage facilities which 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,
1999 through March 31, 2003, or because the Company acquired
these facilities from third parties after January 1, 1999.