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Public Storage, Inc.
Public Storage, Inc.
1997 Annual Report
D r i v e n
b y
a
V i s i o n P u b l i c S t o r a g e , I n c . 19 9 7 A n n u a l R e p o r t
Public Storage, Inc. and The System
Number of Properties
Net Rentable Square Feet
Number of Spaces
Location
Self-Storage
(1)
Commercial
(2)
Self-Storage
(1)
Commercial
(2)
Self-Storage
(1)
Commercial
(2)
Alabama
15 569,000 5,213 Arizona
10
4
672,000
370,000
5,571
116
Arkansas 1 90,000 171
California
278
31
16,615,000
3,974,000
166,000
1,390
Colorado
37 2,329,000 19,623 Connecticut
13 710,000 6,683 Delaware
4 229,000 2,532 Florida
98 5,705,000 56,987 Georgia
36 1,957,000 17,509 Hawaii
4 197,000 3,043 Illinois
65 4,074,000 41,621 Indiana
14 799,000 6,763 Kansas
15
1
881,000
62,000
6,549
40
Kentucky
4 213,000 1,755 Louisiana
7 476,000 4,932 Maryland
32
3
1,802,000
419,000
18,742
75
Massachusetts
10 580,000 5,876 Michigan
12 694,000 6,078 Minnesota
6 341,000 3,138 Missouri
18 954,000 8,629 Nebraska
1 46,000 390 Nevada
22 1,409,000 13,351 New Hampshire
2 123,000 1,041 New Jersey
35 2,018,000 18,915 New York
29 1,692,000 19,000 North Carolina
10 569,000 4,610 Ohio
27 1,650,000 13,936 Oklahoma
8
2
430,000
144,000
3,582
298
Oregon
25
2
1,171,000
102,000
11,413
64
Pennsylvania
18 1,224,000 12,339 Rhode Island
2 64,000 689 South Carolina
2 81,000 736 Tennessee
10
2
647,000
136,000
5,210
58
Texas
122
8
8,029,000
843,000
70,399
380
Utah
6 358,000 2,825 Virginia
33
8
2,040,000
712,000
18,714
398
Washington
36
1
2,226,000
28,000
22,526
23
Wisconsin
7 450,000 3,718 Totals
1,073
63
64,024,000
6,880,000
610,638
3,013
(1)
Self-storage and properties combining self-storage and commercial space.
(2)
Primarily business parks.
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 Companys properties are located in 38 states. At December 31, 1997, the
Company owned interests in 1,136 properties, of which 1,073 were self-storage facilities or facilities that combined both self-storage
and commercial space for rent and 63 were commercial properties.
The Public Storage System is a national infrastructure operated by thousands of people. The system is designed to respond effi-
ciently to the needs of its 550,000 customers. The system also encompasses subsidiaries operating portable self-storage, truck rentals
and retail stores. P u b l i c S t o r a g e , I n c . 19 9 7 A n n u a l R e p o r t
Selected Financial Highlights
1
(In thousands, except per share data)
For the year ended December 31,
1997
(1)
1996
(1)
1995
(1)
1994
1993
Revenues:
Rental income
$ 434,008
$ 294,426
$ 202,134
$ 141,845
$ 109,203
Equity in earnings of real estate entities
17,569
22,121
3,763
764
563
Facility management fees
10,141
14,428
2,144
Interest and other income
9,126
7,976
4,509
4,587
4,914
470,844
338,951
212,550
147,196
114,680
Expenses:
Cost of operations
174,186
94,491
72,247
52,816
42,116
Cost of facility management
1,793
2,575
352
Depreciation and amortization
91,356
64,967
40,760
28,274
24,998
General and administrative
6,384
5,524
3,982
2,631
2,541
Interest expense
6,792
8,482
8,508
6,893
6,079
Environmental cost
2,741
Advisory fee
6,437
4,983
3,619
280,511
176,039
135,027
95,597
79,353
Income before minority interest
190,333
162,912
77,523
51,599
35,327
Minority interest in income
(11,684)
(9,363)
(7,137)
(9,481)
(7,291)
Net income
$ 178,649
$ 153,549
$
70,386
$ 42,118
$ 28,036
Per Common Share
(2)
:
Distributions
$0.88
$0.88
$0.88
$0.85
$0.84
Net income Basic
$0.92
$1.10
$0.96
$1.05
$0.98
Net income Diluted
$0.91
$1.10
$0.95
$1.05
$0.98
Weighted average common shares Basic
98,446
77,117
41,039
23,978
17,483
Weighted average common shares Diluted
98,961
77,358
41,171
24,077
17,558
Balance Sheet Data:
Total assets
$3,311,645
$2,572,152
$1,937,461
$ 820,309
$ 666,133
Total debt
$ 103,558
$ 108,443
$ 158,052
$ 77,235
$ 84,076
Minority interest
$ 288,479
$ 116,805
$ 112,373
$ 141,227
$ 193,712
Shareholders equity
$2,848,960
$2,305,437
$1,634,503
$ 587,786
$ 376,066
Other Data:
Net cash provided by operating activities
$ 293,163
$ 245,329
$ 123,579
$ 79,180
$ 59,477
Net cash used in investing activities
$ (408,313)
$ (479,626)
$ (248,672)
$(169,590)
$(137,429)
Net cash provided by financing activities
$ 129,749
$ 180,717
$ 185,378
$ 100,029
$ 80,100
Funds from operations
(3)
$ 272,234
$ 224,476
$ 105,199
$ 56,143
$ 35,830
1. During 1997, 1996 and 1995 the Company completed several significant business combinations and equity transactions. See Notes 3 and 10 to the Companys
consolidated financial statements.
2. The net income per share amounts prior to 1997 have been restated as required to comply with Statement of Financial Accounting Standards No. 128, Earnings
Per Share. For further discussion of net income per share and the impact of Statement No. 128, see Note 2 to the Companys consolidated financial statements.
3. Funds from operations (FFO), means net income (loss) (computed in accordance with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority
interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Companys pro-rata
share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property management
agreements and excess purchase cost over net assets acquired), and (ii) less FFO attributable to minority interest. FFO is a supplemental performance measure
for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc. (NAREIT). The NAREIT definition does not specifically address
the treatment of minority interest in the determination of FFO or the treatment of the amortization of property management agreements and excess purchase
cost over net assets acquired. In the case of the Company, FFO represents amounts attributable to its shareholders after deducting amounts attributable to the
minority interests and before deductions for the amortization of property management agreements and excess purchase cost over net assets acquired. FFO is
presented because many analysts consider FFO to be one measure of the performance of the Company and it is used in certain aspects of the terms of the Class
B Common Stock. FFO does not take into consideration scheduled principal payments on debt, capital improvements distributions and other obligations of the
Company. Accordingly, FFO is not a substitute for the Companys cash flow or net income as a measure of the Companys liquidity or operating performance or
ability to pay distributions. P u b l i c S t o r a g e , I n c . 19 9 7 A n n u a l R e p o r t
2
S
elf-storage companies come in different sizes. The
vision required to lead a local or regional business is
totally different than the vision required at the national
level. Public Storage became a nationwide enterprise by imple-
menting a powerful vision. The vision is to be The First Choice.
To us, being The First Choice means that customers
considering self-storage turn to us first, want us to meet their
storage needs. One of our goals is to build value in our
reputation as well as in our trade name. We believe we have
a reputation for innovation and flexibility, helping us attract
quality personnel, reflected in our employees throughout our
Company. Furthermore, to the investment community being
The First Choice means we are first among our self-storage
real estate investment trust competitors. One of the nations
leading financial investment firms recently selected our
Company as its Top REIT Pick for 1998.
Our vision of being The First Choice makes customer
satisfaction a priority. We seek to create a desire in our cus-
tomers to use our services and to tell their friends about us.
We market our business through customer loyalty. Word-of-
mouth advertising is often recognized as the best form of
advertising available, a by-product of striving for customer
satisfaction all the time. A vision is inconsequential without
clear, achievable strategies to realize it. Five distinct perfor-
mance strategies energize our vision: Leadership, low long-
term capital costs, low self-storage operating costs,
diversified operations and successful risk management.
To Our
Shareholders
36 (1)
25 (2)
10 (4)
278
(31)
22
6
37
1
15 (1)
8 (2)
122 (8)
18
(1)
7
10 (2)
15
36
98
2
10
33 (8)
4
65
14
27
18
29
6
7
12
2
10
2
13
4
35
4
32 (3)
The Public Storage Property System
Self-Storage Facilities=1,073; Business Parks=63 Figures in Parentheses Denote Business Parks
1960
1980
2000
2020
Changing Demographics
Demand for Goods
Economic Activity
Population Mobility
Self-Storage Industry: Positioned for Growth
In the Right Gear
We believe we have the vision and performance strategies to
support continued expansion in a competitive and dynamic
industry. To maintain industry leadership, we plan to con-
tinue to strengthen the quality and clarity of our vision and
strategies. Although the future has never seemed brighter,
we know that real estate activity flows in cycles. Markets
experience downturns. The relationship between supply and
demand changes. These pressures are magnified by continued
self-storage development and industry consolidation, the
defi