Public Storage, Inc. (NYSE:PSA) announced today operating results
for the quarter ended June 30, 2006. Operating Results for the
Quarter Ended June 30, 2006: Net income for the three months ended
June 30, 2006 was $128,862,000 compared to $108,266,000 for the
same period in 2005, representing an increase of $20,596,000, or
19.0%. This increase is primarily due to improved operations from
our Same Store group of facilities, continued growth in operations
from our newly developed and recently expanded facilities,
continued growth in our recently acquired self-storage facilities
as well as higher interest income. These items were partially
offset by an increase in general and administrative expense. Same
Store net operating income, before depreciation expense, increased
by $6,517,000 or 4.8% as a result of a 5.7% improvement in revenues
partially offset by a 7.4% increase in cost of operations.
Aggregate net operating income for our newly developed and recently
expanded and acquired facilities increased by approximately
$8,654,000. This increase was largely due to the impact of
facilities acquired in 2005 and 2006, combined with continued
fill-up of our newly developed and expansion facilities. Interest
income increased as a result of earning higher interest rates on
invested cash balances combined with significantly higher average
cash balances invested in interest-bearing accounts as compared to
the same period in 2005. Higher invested cash balances were
primarily due to the issuances of $517.5 million of our 7.25%
Series I Cumulative Preferred Stock on May 3, 2006 and $100.0
million of our 7.25% Series J Preferred Partnership Units on May 9,
2006. General and administrative expense increased primarily as a
result of certain costs and expenses totaling $1.1 million with
respect to the proposed merger with Shurgard Storage Centers, Inc.
("Shurgard") (NYSE:SHU). Net income allocable to our common
shareholders (after allocating net income to our preferred and
equity shareholders) was $71,130,000 or $0.55 per common share on a
diluted basis for the three months ended June 30, 2006 compared to
$60,763,000 or $0.47 per common share on a diluted basis for the
same period in 2005, representing an increase of $0.08 per common
share, or 17.0%. 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, offset by
an increase in income allocated to preferred shareholders, as
described below. For the three months ended June 30, 2006 and 2005,
we allocated $52,376,000 and $42,147,000 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 issued preferred securities. Weighted average diluted shares
increased to 129,062,000 for the three months ended June 30, 2006
from 128,618,000 for the three months ended June 30, 2005.
Operating Results for the Six Months Ended June 30, 2006: Net
income for the six months ended June 30, 2006 was $243,078,000
compared to $204,677,000 for the same period in 2005, representing
an increase of $38,401,000, or 18.8%. This increase is primarily
due to improved operations from our Same Store, newly developed and
acquired self-storage facilities, reduced minority interest in
income and higher interest income. These items were partially
offset by increases in general and administrative expense and
depreciation along with a decrease in equity in earnings of real
estate entities. Same Store net operating income, before
depreciation expense, increased by $14,647,000 or 5.6% as a result
of a 5.4% improvement in revenues partially offset by a 5.1%
increase in cost of operations. Aggregate net operating income for
our newly developed, acquired and expansion self-storage facilities
increased by approximately $16,080,000 largely due to the impact of
facilities acquired in 2005 and 2006, combined with continued
fill-up of our newly developed and expansion facilities. Minority
interest in income declined due to the acquisition of minority
interests that occurred in 2005. Interest income increased as a
result of earning higher interest rates on invested cash balances,
combined with higher average cash balances invested in
interest-bearing accounts as compared to the same period in 2005.
Depreciation increased due principally to the expansion of our real
estate portfolio as a result of newly developed and acquired
facilities. General and administrative expense increased primarily
as a result of certain costs and expenses totaling $2.2 million
with respect to the proposed merger with Shurgard. Net income
allocable to our common shareholders (after allocating net income
to our preferred and equity shareholders) was $133,375,000 or $1.03
per common share on a diluted basis for the six months ended June
30, 2006 compared to $109,482,000 or $0.85 per common share on a
diluted basis for the same period in 2005, representing an increase
of $0.18 per common share, or 21.2%. 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, offset partially by increased income allocated to preferred
shareholders, described below. For the six months ended June 30,
2006 and 2005, we allocated $98,991,000 and $82,560,000 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 issued preferred securities. We also recorded
allocations of income to our preferred shareholders with respect to
the application of EITF Topic D-42 totaling $1,904,000 for the six
months ended June 30, 2005 (none for the same period in 2006).
Weighted average diluted shares increased to 129,037,000 for the
six months ended June 30, 2006 from 128,895,000 for the six months
ended June 30, 2005. Funds from Operations: For the three months
ended June 30, 2006, funds from operations ("FFO") increased to
$0.99 per common share on a diluted basis as compared to $0.90 per
common share for the same period in 2005, representing an increase
of $0.09 per common share, or 10.0%. For the six months ended June
30, 2006, FFO increased to $1.93 per common share on a diluted
basis as compared to $1.69 per common share for the same period in
2005, representing an increase of $0.24 per common share, or 14.2%.
For the six months ended June 30, 2006 and 2005, FFO has been
negatively impacted as a result of (i) costs and expenses incurred
in connection with the proposed merger with Shurgard totaling
approximately $1.1 million and $2.2 million for the three and six
months ended June 30, 2006, respectively, (ii) the impact of a gain
on the sale, in the six months ended June 30, 2005, of non-real
estate assets previously used by our containerized storage business
totaling $1,143,000, and (iii) the application of EITF Topic D-42
in connection with the redemption of our preferred securities
($2,778,000 in the six months ended June 30, 2005), as well as
amounts in equity in earnings of real estate entities ($729,000 in
the three and six months ended June 30, 2006 and $131,000 in the
three and six months ended June 30, 2005). The following table
provides a summary of the impact of these items that have occurred
during the three and six months ended June 30, 2006 and 2005: -0-
*T Three Months Ended Six Months Ended June 30, June 30,
-------------------------- --------------------------- Percentage
Percentage 2006 2005 Change 2006 2005 Change ------- ------
---------- ------- ------- ---------- FFO per common share prior to
adjustments for the following items $ 1.01 $ 0.90 12.2% $ 1.96 $
1.70 15.3% Costs and expenses incurred in connection with the
proposed merger with Shurgard (0.01) - (0.02) - Gain on sale of
non-real estate assets previously used by our containerized storage
business - - - 0.01 Application of EITF Topic D-42 in connection
with the redemption of preferred securities (0.01) - (0.01) (0.02)
------- ------ ------- ------- FFO per common share, as reported $
0.99 $ 0.90 10.0% $ 1.93 $ 1.69 14.2% ======= ====== ==========
======= ======= ========== *T 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. In
addition, we believe that FFO is helpful to investors as an
additional measure of the performance of a REIT, because net income
includes the impact of depreciation, which assumes that the value
of real estate diminishes predictably over time, while we believe
that the value of real estate fluctuates due to market conditions
and in response to inflation. 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. 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. As of June 30, 2006, our "Same Store"
portfolio consists of 1,266 facilities, which represents the
facilities that we have consolidated in our financial statements
and have been operating at a stabilized basis throughout 2004,
2005, and the first six months of 2006. The Same Store facilities
contain approximately 73.9 million net rentable square feet,
representing approximately 81% of the aggregate net rentable square
feet of our consolidated self-storage portfolio at June 30, 2006.
The following table summarizes the pre-depreciation historical
operating results of the Same Store facilities: -0- *T Selected
Operating Data for the Same Store Facilities (1,266 Facilities):
Three Months Ended June 30, -------------------------------------
-------------------------------- Percentage 2006 2005 Change
-------- -------- ---------- (Dollar amounts in thousands, except
weighted average data) Revenues: Rental income $205,213 $194,377
5.6% Late charges and administrative fees collected 9,619 8,925
7.8% -------- -------- ---------- Total revenues (a) 214,832
203,302 5.7% Cost of operations (excluding depreciation): Property
taxes 19,346 18,402 5.1% Payroll expense 22,409 20,956 6.9%
Advertising and promotion 6,716 6,814 (1.4)% Utilities 4,362 3,816
14.3% Repairs and maintenance 7,105 6,368 11.6% Telephone
reservation center 2,102 2,041 3.0% Property insurance 3,169 2,246
41.1% Other costs of management 7,540 7,093 6.3% -------- --------
---------- Total cost of operations (a) 72,749 67,736 7.4% --------
-------- ---------- Net operating income (before depreciation) (b)
142,083 135,566 4.8% Depreciation expense (36,472) (38,264) (4.7)%
-------- -------- ---------- Operating income $105,611 $ 97,302
8.5% ======== ======== ========== Gross margin (before
depreciation) 66.1% 66.7% (0.9)% Weighted average for the period:
Square foot occupancy (c) 92.1% 92.1% 0.0% Realized annual rent per
occupied square foot (d) (f) $ 12.05 $ 11.42 5.5% REVPAF (e) (f) $
11.10 $ 10.52 5.5% Selected Operating Data for the Same Store
Facilities (1,266 Facilities): Six Months Ended June 30,
-------------------------------------
-------------------------------- Percentage 2006 2005 Change
-------- -------- ---------- (Dollar amounts in thousands, except
weighted average data) Revenues: Rental income $404,304 $383,949
5.3% Late charges and administrative fees collected 18,756 17,412
7.7% -------- -------- ---------- Total revenues (a) 423,060
401,361 5.4% Cost of operations (excluding depreciation): Property
taxes 40,009 38,333 4.4% Payroll expense 43,739 42,051 4.0%
Advertising and promotion 13,395 12,784 4.8% Utilities 9,162 8,373
9.4% Repairs and maintenance 13,806 13,050 5.8% Telephone
reservation center 4,051 3,794 6.8% Property insurance 5,019 4,248
18.1% Other costs of management 15,598 15,094 3.3% --------
-------- ---------- Total cost of operations (a) 144,779 137,727
5.1% -------- -------- ---------- Net operating income (before
depreciation) (b) 278,281 263,634 5.6% Depreciation expense
(75,020) (77,232) (2.9)% -------- -------- ---------- Operating
income $203,261 $186,402 9.0% ======== ======== ========== Gross
margin (before depreciation) 65.8% 65.7% 0.2% Weighted average for
the period: Square foot occupancy (c) 91.1% 91.0% 0.1% Realized
annual rent per occupied square foot (d) (f) $ 12.00 $ 11.41 5.2%
REVPAF (e) (f) $ 10.94 $ 10.39 5.3% Weighted average at June 30:
Square foot occupancy 92.6% 92.4% 0.2% In place annual rent per
occupied square foot (g) $ 13.30 $ 12.62 5.4% Total net rentable
square feet (in thousands) 73,946 73,946 - 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. b) Net
operating income (before depreciation) or "NOI" is a non-GAAP
(generally accepted accounting priniciples) financial measure that
excludes the impact of depreciation expense. Although depreciation
is an operating expense, we believe that NOI is a meaningful
measure of operating performance, because we utilize NOI in making
decisions with respect to capital allocations, in determining
current property values, segment performance, and comparing
period-to-period and market-to-market property operating results.
NOI is not a substitute for net operating income after depreciation
in evaluating our operating results. c) Square foot occupancies
represent weighted average occupancy levels over the entire period.
d) Realized annual rent per occupied square foot is computed by
annualizing the result of dividing rental income by the weighted
average occupied square footage for the period. Realized annual
rent per occupied square foot takes into consideration promotional
discounts, credit card fees and other costs that reduce rental
income from the contractual amounts due. e) Annualized rental
income per available square foot ("REVPAF") represents annualized
rental income divided by total available net rentable square feet.
f) Late charges and administrative fees are excluded from the
computation of realized annual rent per occupied square foot and
REVPAF because exclusion of these amounts provides a better measure
of our ongoing level of revenue, by excluding the volatility of
late charges, which are dependent principally upon the level of
tenant delinquency, and administrative fees, which are dependent
principally upon the absolute level of move-ins for a period. g) 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. *T The growth in rental income during the remainder of 2006
will depend upon various factors, among which will be 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: -0- *T Three Months Ended
----------------------------------------------- March 31 June 30
September December Full Year 30 31 -------- -------- ---------
-------- --------- Total revenues (in 000's): 2005 $198,059
$203,302 $208,745 $208,272 $818,378 2006 $208,228 $214,832 Total
cost of operations (excluding depreciation expense) (in 000's):
2005 $ 69,991 $ 67,736 $ 67,730 $ 65,873 $271,330 2006 $ 72,030 $
72,749 Property taxes (in 000's): 2005 $19,931 $ 18,402 $ 19,573 $
17,025 $ 74,931 2006 $20,663 $ 19,346 Media advertising expense (in
000's): 2005 $ 3,588 $ 2,955 $ 2,314 $ 2,141 $ 10,998 2006 $ 3,978
$ 2,611 Other advertising and promotion expense (in 000's): 2005 $
2,382 $ 3,859 $ 2,934 $ 3,689 $ 12,864 2006 $ 2,701 $ 4,105 REVPAF:
2005 $ 10.25 $ 10.52 $ 10.77 $ 10.76 $ 10.58 2006 $ 10.77 $ 11.10
Weighted average realized annual rent per occupied square foot for
the period: 2005 $ 11.41 $ 11.42 $ 11.75 $ 11.89 $ 11.61 2006 $
11.94 $ 12.05 Weighted average square foot occupancy levels for the
period: 2005 89.9% 92.1% 91.7% 90.5% 91.1% 2006 90.2% 92.1% *T
Merger with Shurgard: As previously announced, on March 6, 2006,
the boards of directors of Public Storage and Shurgard approved a
definitive merger agreement under which Public Storage will acquire
Shurgard at a total transaction value of approximately $5.0
billion. In connection with the proposed merger, on July 24, 2006,
Public Storage and Shurgard filed the definitive joint proxy
statement/prospectus with the Securities and Exchange Commission
and began mailing it to their shareholders. Each company has
scheduled a shareholders' meeting to be held on August 22, 2006 to,
among other things, vote on approval of the merger. Under the terms
of the merger agreement, Public Storage will issue, in a taxable
transaction, approximately 41 million shares of common stock to
holders of Shurgard's common stock and assume Shurgard's debt of
approximately $1.9 billion (as of March 31, 2006). In addition,
approximately $136 million of Shurgard's preferred stock will be
redeemed. The merger is currently targeted to close on or shortly
after the date of the shareholder meetings. More information with
respect to the proposed merger can be found in the definitive proxy
statement/prospectus dated July 24, 2006 filed with the Securities
and Exchange Commission as part of a registration statement
regarding the proposed merger. Included in general and
administrative expense for the three and six months ended June 30,
2006, respectively, are costs related to the merger incurred prior
to signing the merger agreement, as well as expenditures in
planning the integration of the two companies of approximately $1.1
million and $2.2 million, respectively. In upcoming quarters, we
expect to incur additional incremental costs related to the
integration of the two companies, as well as costs associated with
winding down Shurgard's business affairs. These costs cannot be
estimated at this time and will be expensed as incurred; therefore,
they are expected to have a negative impact on our earnings going
forward. Development and Asset Acquisition and Disposition
Activities: During the second quarter of 2006, we opened two newly
developed facilities at a total cost of $39.8 million containing
192,000 net rentable square feet. We also completed expansions to
three facilities at a total cost of $8.2 million, adding 145,000
net rentable square feet of self-storage space. At June 30, 2006,
there were 54 projects that were either under construction or were
expected to begin construction generally within the next year,
comprised of 49 projects (2,874,000 net additional rentable square
feet) which expand existing self-storage facilities and enhance
their visual appeal for a total estimated cost of $244.3 million,
and five projects (420,000 net rentable square feet) to convert
space at former containerized storage facilities into self-storage
space for a total estimated cost of $18.4 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 2006, we acquired six facilities from third
parties containing an aggregate of 492,000 net rentable square feet
for an aggregate cost of approximately $52.6 million. We were
notified that one of our self-storage facilities located in
Seattle, Washington, will be condemned by local governmental
authorities. Accordingly, we commenced presenting the operating
results of this facility in discontinued operations on our
consolidated statement of income. The net income from this facility
for all periods presented is included in Discontinued Operations.
The condemnation was completed in July 2006, and a gain on the
disposition of approximately $2.4 million is expected to be
recorded in the third quarter of 2006. Issuance and Redemption of
Preferred Securities: On May 3, 2006, we issued 20,700,000
depositary shares, with each depositary share representing 1/1,000
of a share of 7.25% Cumulative Preferred Stock, Series I. The
offering resulted in $517.5 million of gross proceeds. On May 9,
2006, we completed a private placement of $100 million of our 7.25%
Series J preferred units. We expect that the proceeds from issuing
these two securities will be used to fund cash requirements with
respect to the merger with Shurgard and general corporate purposes.
During September and October of 2006, we have the opportunity to
redeem our 8.00% Series R preferred stock ($510 million) and our
7.88% Series S preferred stock ($143.75 million), respectively. The
potential redemption of these securities, on their earliest
redemption dates, would result in EITF Topic D-42 allocations of
approximately $22 million in the third quarter of 2006. In
addition, PS Business Parks, Inc., an affiliate in which we own
approximately 45% of the common equity, has similar redemption
opportunities including $53 million in preferred units in the third
quarter of 2006 and $50 million in preferred stock in January 2007.
Our pro rata share of EITF Topic D-42 allocations from our
investment in PS Business Parks, Inc. (assuming redemption on the
earliest possible date) is expected to be approximately $1.4
million in the remainder of 2006. Share Repurchases: Our Board of
Directors has authorized the repurchase from time to time of up to
25,000,000 shares of our common stock on the open market or in
privately negotiated transactions. From the inception of the
repurchase program through August 2, 2006 (none from January 1,
2006 through August 2, 2006), we have repurchased a total of
22,201,720 shares of common stock at an aggregate cost of
approximately $567.2 million. Distributions Declared: On August 2,
2006, the Board of Directors declared a quarterly distribution of
$0.50 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 the
distributions are payable on September 28, 2006 to shareholders of
record as of September 15, 2006, which, if the merger is completed,
will include distributions on the shares issued in the merger.
Second Quarter Conference Call: A conference call is scheduled for
Thursday, August 3, 2006, at 9:00 a.m. (PDT) to discuss the second
quarter ended June 30, 2006 earnings results. The participant toll
free number is (877) 715-5318 (conference ID number 7661950). A
simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Corporate Information, Investor
Relations" (conference ID number 7661950). A replay of the
conference call may be accessed through August 17, 2006 by calling
(877) 519-4471 or by using the link at www.publicstorage.com under
"Corporate Information, Investor Relations." Both forms of replay
utilize conference ID number 7661950. About Public Storage, Inc.:
Public Storage, Inc., a member of the S&P 500 and The Forbes
Global 2000, 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, 2006,
the Company had interests in 1,516 storage facilities with
approximately 92 million net rentable square feet. Additional
information about Public Storage, Inc. is available on our website,
www.publicstorage.com Additional Information Regarding Merger with
Shurgard: In connection with the proposed transaction, Public
Storage and Shurgard have filed a definitive joint proxy
statement/prospectus dated July 24, 2006 with the Securities and
Exchange Commission as part of a registration statement regarding
the proposed merger of Public Storage and Shurgard. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT MATERIAL BECAUSE THEY
CONTAIN IMPORTANT INFORMATION ABOUT PUBLIC STORAGE AND SHURGARD AND
THE PROPOSED MERGER. Investors and security holders may obtain a
free copy of the definitive proxy statement/prospectus and other
documents filed by Public Storage and Shurgard with the SEC at the
SEC's website at www.sec.gov. Each company has scheduled a
shareholders' meeting to be held on August 22, 2006, to, among
other things, vote on approval of the merger. The definitive joint
proxy statement/prospectus and other relevant documents may also be
obtained free of charge from Public Storage or Shurgard by
directing such request to: Public Storage, Inc. 701 Western Avenue,
Glendale, CA 91201-2349, Attention: Investor Relations or Shurgard
Storage Centers, Inc., 1155 Valley Street, Suite 400, Seattle, WA
98109-4426, Attention: Investor Relations. Public Storage and
Shurgard and their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from
the shareholders of Public Storage and Shurgard in connection with
the merger. Information about Public Storage and its directors and
executive officers, and their ownership of Public Storage and
information about Shurgard and its directors and executive
officers, and their ownership of Shurgard securities, is set forth
in the definitive joint proxy statement/prospectus dated July 24,
2006 included in the registration statement on Form S-4 filed with
the SEC on April 20, 2006 and amended May 24, 2006, June 12, 2006,
June 19, 2006 and July 24, 2006. Additional information regarding
the interests of those persons may be obtained by reading the
definitive proxy statement/prospectus. This communication shall not
constitute an offer to sell or the solicitation of an offer to sell
or the solicitation of an offer to buy any securities, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933. Forward-Looking Statements: 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, 2005 and our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, our registration statement on Form
S-4 filed on April 20, 2006, and amended May 24, 2006, June 12,
2006, June 19, 2006 and July 24, 2006, and in the definitive joint
proxy statement/prospectus filed as part of the Form S-4, and in
reports on Form 8-K. These risks include, but are not limited to,
the following: risks related to the proposed merger with Shurgard,
including approval of the proposed merger with Shurgard by the
shareholders of Shurgard and Public Storage and the satisfaction of
other closing conditions to the merger, difficulties that may be
encountered in integrating Public Storage and Shurgard, the
inability to realize or delays in realizing expected synergies from
the proposed merger, unanticipated operating costs resulting from
the proposed merger, and risks associated with international
operations; 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;
and economic uncertainty due to the impact of war or terrorism
could adversely affect its business plan. 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. -0- *T PUBLIC STORAGE, INC
SELECTED FINANCIAL DATA (Unaudited) Three Months Ended Six Months
Ended June 30, June 30, ------------------- -------------------
2006 2005 2006 2005 -------- -------- -------- -------- (Amounts in
thousands, except per share data) Revenues: Rental income:
Self-storage facilities $262,398 $235,255 $513,910 $462,601
Commercial properties 3,013 2,927 6,005 5,775 Containerized storage
facilities 4,200 3,988 8,130 7,825 Ancillary operations 18,369
17,198 33,543 31,216 Interest and other income 10,047 3,394 15,122
6,287 -------- -------- -------- -------- 298,027 262,762 576,710
513,704 -------- -------- -------- -------- Expenses: Cost of
operations: Self-storage facilities 89,425 80,402 177,160 162,046
Commercial properties 1,235 1,043 2,583 2,170 Containerized storage
facilities 4,219 3,274 7,529 6,016 Ancillary operations 11,696
10,140 22,312 20,557 Depreciation and amortization 48,626 48,240
98,675 96,178 General and administrative 6,975 6,128 13,754 11,269
Interest expense 1,872 1,794 3,429 3,457 -------- -------- --------
-------- 164,048 151,021 325,442 301,693 -------- -------- --------
-------- Income from continuing operations before equity in
earnings of real estate entities, minority interest in income,
cumulative effect of change in accounting principal, gain on sale
of real estate assets and discontinued operations 133,979 111,741
251,268 212,011 Equity in earnings of real estate entities 3,124
4,851 6,590 10,529 Minority interest in income: Allocable to
preferred minority interests: Based upon ongoing distributions (a)
(4,658) (3,590) (8,249) (8,965) Special distribution and EITF Topic
D-42 allocation (a) - - - (874) Other partnership interests (4,070)
(4,878) (7,638) (9,273) -------- -------- -------- -------- Income
from continuing operations 128,375 108,124 241,971 203,428
Cumulative effect of change in accounting principle - - 578 - Gain
on disposition of real estate assets 466 53 466 53 Discontinued
operations (b) 21 89 63 1,196 -------- -------- -------- --------
Net income $128,862 $108,266 $243,078 $204,677 ======== ========
======== ======== Net income allocation: ----------------------
Allocable to preferred shareholders: Based on distributions paid $
52,376 $ 42,147 $ 98,991 $ 82,560 Based on redemptions of preferred
stock - - - 1,904 Allocable to equity shareholders, Series A 5,356
5,356 10,712 10,731 Allocable to common shareholders 71,130 60,763
133,375 109,482 -------- -------- -------- -------- $128,862
$108,266 $243,078 $204,677 ======== ======== ======== ======== Per
common share: ------------------------------- Net income per share
- Basic $ 0.55 $ 0.47 $ 1.04 $ 0.85 ======== ======== ========
======== Net income per share - Diluted $ 0.55 $ 0.47 $ 1.03 $ 0.85
======== ======== ======== ======== Weighted average common shares
- Basic 128,180 127,986 128,151 128,284 ======== ======== ========
======== Weighted average common shares - Diluted 129,062 128,618
129,037 128,895 ======== ======== ======== ======== (a) 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. We ceased allocating income with respect to
these interests following their redemption. (b) Discontinued
operations includes a gain on sale of non-real estate assets
previously used by the discontinued containerized storage
operations totaling $1,143,000 during the six months ended June 30,
2005. Discontinued operations also includes the operations of a
self-storage facility located in Seattle, Washington, which as of
June 30, 2006 was in the process of being condemned by local
government authorities. PUBLIC STORAGE, INC. SELECTED FINANCIAL
DATA June 30, December 31, 2006 2005 ------------ ------------
(Unaudited) (Amounts in thousands, except share and per share data)
ASSETS Cash and cash equivalents $ 983,630 $ 493,501 Operating real
estate facilities: Land and building, at cost 6,147,679 5,930,484
Accumulated depreciation (1,594,913) (1,500,128) -----------
----------- 4,552,766 4,430,356 Construction in process 19,695
54,472 ----------- ----------- 4,572,461 4,484,828 Investment in
real estate entities 303,884 328,555 Goodwill 174,634 176,285 Other
assets 65,527 69,317 ----------- ----------- Total assets $
6,100,136 $ 5,552,486 =========== =========== LIABILITIES AND
SHAREHOLDERS' EQUITY Notes payable $ 105,053 $ 113,950 Debt to
joint venture partner 35,784 35,697 Preferred stock called for
redemption - 172,500 Accrued and other liabilities 171,773 159,360
----------- ----------- Total liabilities 312,610 481,507 Minority
interest - preferred 325,000 225,000 Minority interest - other
33,223 28,970 Shareholders' equity: Preferred Stock, $0.01 par
value, 50,000,000 shares authorized, 1,723,236 shares issued (in
series) and outstanding (1,698,336 at December 31, 2005), at
liquidation preference: Cumulative Preferred Stock, issued in
series 3,120,900 2,498,400 Common Stock, $0.10 par value,
200,000,000 shares authorized, 128,210,747 shares issued and
outstanding (128,089,563 at December 31, 2005) 12,821 12,809 Equity
Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
8,744.193 shares issued and outstanding at June 30, 2006 and
December 31, 2005 - - Paid-in capital 2,415,673 2,430,671
Cumulative net income 3,432,344 3,189,266 Cumulative distribution
paid (3,552,435) (3,314,137) ----------- ----------- Total
shareholders' equity 5,429,303 4,817,009 ----------- -----------
Total liabilities and shareholders' equity $ 6,100,136 $ 5,552,486
=========== =========== Selected Financial Data Computation of
Funds From Operations (a) (Unaudited) Three Months Ended Six Months
Ended June 30, June 30, --------------------- ---------------------
2006 2005 2006 2005 --------- --------- --------- ---------
(Amounts in thousands, except per share data) Computation of Funds
from Operations (FFO) allocable to Common Stock
-------------------------- Net income $ 128,862 $ 108,266 $ 243,078
$ 204,677 Add back - depreciation and amortization 48,626 48,240
98,675 96,178 Add back - depreciation and amortization included in
Discontinued Operations 20 42 41 109 Add back - our pro rata share
of depreciation from equity investments 9,466 8,758 18,720 17,443
Eliminate - depreciation with respect to non-real estate assets
(45) (772) (105) (1,682) Eliminate - gain on sale of real estate
assets (466) (53) (466) (53) Eliminate - our pro rata share of
PSB's gain on sale of real estate (711) (441) (1,023) (1,706) Add
back - minority interest share of income 8,728 8,468 15,887 19,112
--------- --------- --------- --------- Consolidated FFO 194,480
172,508 374,807 334,078 Allocable to preferred minority interest:
Based upon ongoing distributions (b) (4,658) (3,590) (8,249)
(8,965) Special distribution and EITF Topic D-42 allocation (b) - -
- (874) Allocable to minority interest - other partnership
interests (4,386) (6,101) (8,266) (11,816) --------- ---------
--------- --------- Remaining FFO allocable to our shareholders
185,436 162,817 358,292 312,423 Less: allocations to preferred and
equity stock shareholders: Preferred shareholder distributions
(52,376) (42,147) (98,991) (82,560) Issuance costs on redeemed
preferred shares - - - (1,904) Equity Stock, Series A distributions
(5,356) (5,356) (10,712) (10,731) --------- --------- ---------
--------- Remaining FFO allocable to Common Stock (a) $ 127,704 $
115,314 $ 248,589 $ 217,228 ========= ========= ========= =========
Weighted average shares: -------------------------- Regular common
shares 128,180 127,986 128,151 128,284 Weighted average stock
options and restricted stock units outstanding using treasury
method 882 632 886 611 --------- --------- --------- ---------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share 129,062 128,618 129,037 128,895
========= ========= ========= ========= FFO per common share (a)
(c) $ 0.99 $ 0.90 $ 1.93 $ 1.69 ========= ========= =========
========= (a) Funds from operations ("FFO") is a term defined by
the National Association of Real Estate Investment Trusts
("NAREIT"). FFO is a non-GAAP (generally accepted accounting
principles) financial measure. FFO 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. In addition, we believe that
FFO is helpful to investors as an additional measure of the
performance of a REIT, because net income includes the impact of
depreciation, which assumes that the value of real estate
diminishes predictably over time, while we believe that the value
of real estate fluctuates due to market conditions and in response
to inflation. 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. (c) FFO per common share 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 six months ended June
30, 2005. Public Storage, Inc. Selected Financial Data Computation
of Funds Available for Distribution (b) (Unaudited) Three Months
Ended Six Months Ended June 30, June 30, -------------------
------------------- 2006 2005 2006 2005 -------- -------- --------
-------- (Amounts in thousands) Computation of Funds Available for
Distribution ("FAD"): ------------------------------ FFO allocable
to Common Stock (a) $127,704 $115,314 $248,589 $217,228 Add:
Stock-based compensation expense 1,491 1,152 3,027 2,383 Impact of
application of EITF Topic D-42 - - - 2,778 EITF Topic D-42 charges
included in equity in earnings of real estate entities 729 131 729
131 Less: Capital expenditures to maintain facilities (15,070)
(2,564) (23,449) (9,370) -------- -------- -------- -------- Funds
available for distribution ("FAD") (b) $114,854 $114,033 $228,896
$213,150 ======== ======== ======== ======== Distribution to common
shareholders $ 64,297 $ 57,593 $128,595 $115,665 ======== ========
======== ======== Distribution payout ratio (b) 56.0% 50.5% 56.2%
54.3% ======== ======== ======== ======== (a) Funds from operations
("FFO") is a term defined by the National Association of Real
Estate Investment Trusts ("NAREIT"). FFO is a non-GAAP (generally
accepted accounting principles) financial measure. FFO 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. In
addition, we believe that FFO is helpful to investors as an
additional measure of the performance of a REIT, because net income
includes the impact of depreciation, which assumes that the value
of real estate diminishes predictably over time, while we believe
that the value of real estate fluctuates due to market conditions
and in response to inflation. 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 by FAD. FAD is presented because
many analysts consider it to be a measure of the performance and
liquidity 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.
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, -------------------
------------------- 2006 2005 2006 2005 -------- -------- --------
-------- (Amounts in thousands) Revenues for the 1,266 Same Store
facilities $214,832 $203,302 $423,060 $401,361 Revenues for
non-Same Store facilities (a): Development facilities (year
opened): 2002 and 2003 6,909 6,136 13,519 11,886 2004 1,742 1,247
3,360 2,254 2005 584 48 953 50 2006 56 - 56 - Combination
facilities 5,055 4,085 9,773 7,972 Acquisition facilities (year
acquired): 2004 8,470 7,454 16,550 14,450 2005 6,178 1,377 11,816
1,877 2006 1,442 - 1,839 - Newly consolidated facilities 3,890 -
7,188 - Expansion facilities 13,240 11,606 25,796 22,751 --------
-------- -------- -------- Consolidated self-storage revenues (b)
$262,398 $235,255 $513,910 $462,601 ======== ======== ========
======== Cost of operations for the 1,266 Same Store facilities $
72,749 $ 67,736 $144,779 $137,727 Cost of operations for non- Same
Store facilities (a): Development facilities (year opened): 2002
and 2003 2,230 2,218 4,395 4,266 2004 551 659 1,129 1,178 2005 406
94 820 117 2006 114 - 114 - Combination facilities 1,846 1,898
3,658 3,505 Acquisition facilities (year acquired): 2004 3,204
3,206 6,211 6,357 2005 2,385 674 4,854 951 2006 717 - 942 - Newly
consolidated facilities 941 - 1,720 - Expansion facilities 4,282
3,917 8,538 7,945 -------- -------- -------- -------- Consolidated
self-storage cost of operations (b) $ 89,425 $ 80,402 $177,160
$162,046 ======== ======== ======== ======== (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, 2004 through June 30, 2005, or
because we acquired these facilities from third parties after
December 31, 2003. (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.
*T
Shurgard Storage Ctr (NYSE:SHU)
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Shurgard Storage Ctr (NYSE:SHU)
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