-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCzF8261Kg9wrFWbdDy8dhQdZKyhnuJ1XKzGE2jLvEpC4kPA8Kq3LLzj26/VQO3M uQ0TRN9rVCbSRj8XNdjRPg== 0000318380-06-000040.txt : 20061011 0000318380-06-000040.hdr.sgml : 20061011 20061010183244 ACCESSION NUMBER: 0000318380-06-000040 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060822 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061011 DATE AS OF CHANGE: 20061010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC STORAGE INC /CA CENTRAL INDEX KEY: 0000318380 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953551121 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08389 FILM NUMBER: 061138811 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: STE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2349 BUSINESS PHONE: (818) 244-8080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 FORMER COMPANY: FORMER CONFORMED NAME: STORAGE EQUITIES INC DATE OF NAME CHANGE: 19920703 8-K/A 1 psi8ka_82206.txt PUBLIC STORAGE, INC. FORM 8-K/A 08-22-06 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Amendment No. 1 on FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: August 22, 2006 (Date of earliest event reported) Public Storage, Inc. (Exact name of registrant as specified in its charter) California ---------------------------------------------- (State or other jurisdiction of incorporation) 1-8389 95-3551121 - ----------------------------------------- --------------------------------- (Commission File Number) (IRS Employer Identification No.) 701 Western Avenue, Glendale, California 91201-2349 - ----------------------------------------- --------------------------------- (Address of Principal Executive Offices) (Zip Code) (818) 244-8080 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not applicable -------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) EXPLANATORY NOTE This Amendment No. 1 amends the Current Report on Form 8-K of Public Storage, Inc. ("Public Storage") filed with the United States Securities and Exchange Commission on August 23, 2006 related to the acquisition of Shurgard Storage Centers, Inc. ("Shurgard") pursuant to an Agreement and Plan of Merger, dated as of March 6, 2006, by and among Shurgard, Public Storage and Shurgard Storage Centers LLC (formerly known as ASKL Sub LLC), a Delaware limited liability company and subsidiary of Public Storage. This Form 8-K/A amends the Form 8-K filed on August 23, 2006 to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K and to furnish certain other information. The information previously reported under Item 2.01 in the Form 8-K filed on August 23, 2006 is hereby incorporated by reference into this Form 8-K/A. ITEM 7.01 REGULATION FD DISCLOSURE The information provided herein in Item 7.01 of this Form 8-K/A shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing. (a) Recent liquidity events On June 30, 2006, our cash balance was approximately $983,630,000. As a result of the net impact of the Shurgard Merger and associated transactions as reflected in the accompanying pro-forma balance sheet and income statement, our cash balance was reduced to approximately $212,598,000 on a pro-forma basis at June 30, 2006. We have had additional financing and investing transactions after June 30, 2006 that are not reflected on the pro forma financial statements because they were not directly related to the Shurgard merger, as follows: o On August 8, 2006, we issued 18,400,000 depositary shares, each representing 1/1,000 of a share of our 7.25% Cumulative Preferred Stock, Series K, for aggregate gross proceeds of $460.0 million. o On August 23, 2006, we acquired the remaining partnership interests that we did not own in a series of partnerships. These partnerships, which were formed by Shurgard, owned 20 self-storage facilities located in Florida. The aggregate acquisition cost was approximately $16.5 million in cash. o On September 6, 2006, we acquired the remaining partnership interests in various partnerships that we did not own for an aggregate cost of approximately $44.3 million in cash. These partnerships, which were formed by Shurgard, owned 47 self-storage facilities located in North Carolina and South Carolina. o On September 28, 2006, we redeemed all of our outstanding 8.000% Cumulative Preferred Stock, Series R, for a total redemption value of $510.0 million, plus accrued dividends o On September 26, 2006, we called for redemption all outstanding depositary shares representing interests in our 7.875% Cumulative Preferred Stock, Series S. The redemption will occur on October 31, 2006. The aggregate redemption amount to be paid to all holders of the depositary shares, before payment of accrued dividends, is approximately $143.8 million. (b) Earnings for the quarter ended September 30, 2006 During the three months ended September 30, 2006, we expect to report significant incremental expenses, principally associated with the integration of Shurgard's operations into Public Storage's operations, the wind-down of Shurgard's business affairs, and the reduction in capitalized development costs for development projects that will no longer be pursued. These incremental expenses are subject to change, but are currently estimated to be between approximately $25,000,000 and $30,000,000, or approximately $0.17 to $0.21 per common share based upon estimated weighted average shares outstanding totaling approximately 146.0 million shares for the quarter ended September 30, 2006. We expect to incur additional expenses in the quarter ended December 31, 2006 related to the continued winding down of the business affairs of Shurgard, however, such expenses are expected to be significantly less than those experienced in the quarter ended September 30, 2006. None of these expenses are included in the pro forma financial statements filed within because they are not expected to be recurring. In addition, as a result of the aforementioned redemption activities with respect to our Series R and Series S Cumulative Preferred Stock, pursuant to Emerging Issues Task Force Topic D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or the Induced Conversion of Preferred Stock" ("EITF D-42") we expect to reflect an additional allocation of income to the preferred shareholders based upon the original issue costs, of approximately $21,643,000 for the quarter ended September 30, 2006, representing approximately $0.15 per common share based upon estimated weighted average shares outstanding totaling approximately 146 million shares for the quarter ended September 30, 2006. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired. Audited Financial Statements of Shurgard as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004, and 2003 and Unaudited Financial Statements of Shurgard as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 are set forth as Exhibits 99.3 and 99.4 and are incorporated herein by reference. (b) Pro Forma Financial Information. Unaudited Pro Forma Condensed Consolidated Financial Statements of Public Storage (i) as of June 30, 2006 and for the six months then ended and (ii) for the year ended December 31, 2005 are set forth herein as Exhibits 99.1 and 99.2 and are incorporated herein by reference. (d) Exhibits. The following are filed as Exhibits to this Report. Exhibit No. Exhibit Description - ---------- -------------------------------------------------------------------- 23.1 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm for Shurgard. 23.2 Consent of Deloitte Reviseurs d'Entreprises, independent auditor of Shurgard Self Storage, SCA. 99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements of Public Storage as of June 30, 2006 and for the six months then ended. 99.2 Unaudited Pro Forma Condensed Consolidated Financial Statements of Public Storage for the year ended December 31, 2005 (attached as Exhibit 99.1 to a Current Report on Form 8-K filed by Public Storage on April 24, 2006 and incorporated herein by reference). 99.3 Audited Financial Statements of Shurgard as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004, and 2003 (set forth in Shurgard's Form 8-K dated May 23, 2006 as exhibit 99.3, and incorporated herein by reference). 99.4 Unaudited Financial Statements of Shurgard as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 (set forth on pages 3 to 31 of the Quarterly Report on Form 10-Q of Shurgard for the quarter ended June 30, 2006 and incorporated herein by reference). 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. Date: October 10, 2006 By:/s/ John Reyes -------------- Name: John Reyes Title: Senior Vice President & Chief Financial Officer EXHIBIT INDEX Exhibit No. Exhibit Description - ---------- -------------------------------------------------------------------- 23.1 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm for Shurgard. 23.2 Consent of Deloitte Reviseurs d'Entreprises, independent auditor of Shurgard Self Storage, SCA. 99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements of Public Storage as of June 30, 2006 and for the six months then ended. 99.2 Unaudited Pro Forma Condensed Consolidated Financial Statements of Public Storage for the year ended December 31, 2005 (attached as Exhibit 99.1 to a Current Report on Form 8-K filed by Public Storage on April 24, 2006 and incorporated herein by reference). 99.3 Audited Financial Statements of Shurgard as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004, and 2003 (set forth in Shurgard's Form 8-K dated May 23, 2006 as exhibit 99.3, and incorporated herein by reference). 99.4 Unaudited Financial Statements of Shurgard as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 (set forth on pages 3 to 31 of the Quarterly Report on Form 10-Q of Shurgard for the quarter ended June 30, 2006 and incorporated herein by reference). Exhibit 23.1 Consent of PricewaterhouseCoopers, LLP CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-81041; 333-101425; 333-115660; 333-130137; and 333-136169), and on Form S-8 (Nos. 33-36004; 33-55541; 333-13463; 333-75327; 333-50270; 333-52400; and 333-59218) of Public Storage Inc., of our report dated March 20, 2006, except with respect to our opinions on the consolidated financial statements and financial statement schedule insofar as they relate to the effects of the discontinued operations as discussed in Note 25, as to which the date is May 23, 2006, relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Shurgard Storage Centers, Inc., which is incorporated by reference in this Current Report on Form 8-K/A of Public Storage, Inc., dated October 10, 2006. /s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP Seattle, Washington October 10, 2006 Exhibit 23.2 Consent of Deloitte Reviseurs d'Entreprises CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-81041; 333-101425; 333-115660; 333-130137; and 333-136169) and on Form S-8 (Nos. 33-36004; 33-55541; 333-13463; 333-75327; 333-50270; 333-52400; and 333-59218), of our report dated April 23, 2004 relating to the consolidated financial statements of Shurgard Self-Storage, SCA which is incorporated by reference in this Current Report on Form 8K/A of Public Storage Inc. dated October 10, 2006. /s/ Deloitte Reviseurs d'Entreprises - ------------------------------------ Deloitte Reviseurs d'Entreprises SC s.f.d. SCRL Represented by Daniel Kroes October 9, 2006 EX-99 2 psi8ka_ex991.txt EXHIBIT 99.1 Exhibit 99.1 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION On March 6, 2006, Public Storage, Inc. ("Public Storage") entered into an Agreement and Plan of Merger, by and among Shurgard Storage Centers, Inc. ("Shurgard"), Public Storage, and a subsidiary of Public Storage. The merger was completed on August 22, 2006. Under the terms of the merger agreement, each outstanding share of common stock of Shurgard was exchanged for 0.82 shares of Public Storage common stock, and each outstanding Shurgard stock option was converted into 0.82 options exercisable for shares of Public Storage common stock. The unaudited pro forma condensed consolidated financial statements were prepared to reflect this transaction. The merger is accounted for using the purchase method as prescribed by Statement of Financial Accounting Standards No. 141, "Business Combinations," with intangible assets, if any, to be recorded in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." The allocation of the purchase price reflected in the pro forma condensed consolidated balance sheet is preliminary and is subject to change. We can give no assurance that when the audit with respect to such allocation of purchase price is completed the financial information will not change or that any change will not be material. The unaudited pro forma condensed consolidated balance sheet at June 30, 2006 has been prepared to reflect the merger, as if the merger occurred on June 30, 2006. The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2005 and the six months ended June 30, 2006 have been prepared assuming the merger occurred on January 1, 2005. The adjustments made to the pro forma condensed consolidated balance sheet have been made to reflect the allocation of the purchase price and other costs of the merger to the tangible and intangible assets acquired. The adjustments made to the pro forma condensed consolidated statements of income have been made to reflect the estimated impact on income allocated to minority interest, income allocated to preferred shareholders, and interest expense as a result of financing the merger, the impact of eliminating certain duplicate administrative costs that will be eliminated as a result of the merger, the impact on depreciation and amortization expense of increasing the carrying values of the real estate assets and intangible assets acquired, the impact of reduced interest income reflecting the utilization of cash on hand to fund the merger, as well as to reclassify certain items in Shurgard's historical balances in order to conform to Public Storage's presentation. The pro forma adjustments are based on available information and on certain assumptions as set forth in the notes to the pro forma consolidated financial statements that we believe are reasonable in the circumstances. The pro forma condensed consolidated financial statements and accompanying notes should be read in conjunction with the historical financial statements of Public Storage, which are included in its Annual Report on Form 10-K for the year ended December 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed with the Securities and Exchange Commission (the "Commission"), and those of Shurgard, which are included on its financial statements for the year ended December 31, 2005 on its Form 8-K dated May 23, 2006 as well as its Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. You can find these reports at the Commission's website at http://www.sec.gov. The following pro forma condensed consolidated financial statements do not purport to represent what Public Storage's results of operations would actually have been if the merger had in fact occurred as of January 1, 2005 or to project Public Storage's results of operations for any future date or period. As a result of the merger, Public Storage believes that there will be certain cost efficiencies due to the economies of scale of having a larger number of facilities in certain markets after the merger is consummated. Public Storage expects such cost efficiencies in telephone directory advertising, property insurance, and payroll cost with respect to supervisory personnel. In addition, some of Shurgard's facilities will be subject to property tax reappraisal resulting in increases to property tax expense. Public Storage is evaluating the potential cost savings and increase in property taxes; however, it is not able to quantify the amount of such savings or costs at this time. Accordingly, no adjustments have been made to the pro forma condensed consolidated statement of income to reflect expected cost savings or increases to property taxes. 1 PUBLIC STORAGE, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 (Unaudited)
Pro Forma Adjustments -------------------------------------------- Stock Merger Option ---------------------------- Public Storage Public Storage Shurgard Exercises Purchase Valuation Post-Merger -------------- -------------- ------------ ------------- -------------- -------------- (Historical) (Historical) (Note 1) (Note 3) (Note 4) (Pro Forma) ASSETS Cash and cash equivalents $ 983,630 $ 40,938 $74,426 $ (886,396) $ - $ 212,598 Operating real estate facilities, net of accumulated depreciation 4,552,766 2,797,425 - - 2,273,950 9,624,141 Construction in process 19,695 77,396 - - - 97,091 Properties held for sale - 3,893 - - - 3,893 Restricted cash - 3,236 - - - 3,236 Investment in real estate entities 303,884 - - - - 303,884 Goodwill 174,634 27,440 - (27,440) 174,634 Intangible assets, net - - - - 384,716 384,716 Other assets 65,527 132,038 - - (41,743) 155,822 Unallocated Purchase price - - - 3,239,071 (3,239,071) - -------------- -------------- ------------ ------------- -------------- -------------- Total assets $ 6,100,136 $ 3,082,366 $74,426 $ 2,352,675 $ (649,588) $10,960,015 ============== ============== ============ ============= ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Lines of credit $ - $ 626,700 - $ (626,700) $ - $ - Notes payable 105,053 1,355,320 - (67,000) 15,315 1,406,688 Debt to joint venture partner 35,784 -- - - - 35,784 Accrued and other liabilities 171,773 153,874 - - (360) 325,287 -------------- -------------- ------------ ------------- -------------- -------------- Total liabilities 312,610 2,135,894 - (693,700) 14,955 1,769,759 Minority interest--preferred 325,000 - - - - 325,000 Minority interest--other 33,223 145,679 - - - 178,902 Shareholders' equity: Preferred stock 3,120,900 131,183 - (136,250) 5,067 3,120,900 Common stock 12,821 47 175 3,890 (47) 16,886 Equity stock -- - - - - - Paid in capital 2,415,673 1,156,916 74,251 3,178,735 (1,156,916) 5,668,659 Cumulative net income 3,432,344 - - - 3,432,344 Accumulated deficit - (501,327) - - 501,327 - Accumulated other comprehensive income - 13,974 - - (13,974) - Cumulative distributions paid (3,552,435) - - - - (3,552,435) -------------- -------------- ------------ ------------- -------------- -------------- Total shareholders' equity 5,429,303 800,793 74,426 3,046,375 (664,543) 8,686,354 ============== ============== ============ ============= ============== ============== Total liabilities and shareholders' equity $ 6,100,136 $ 3,082,366 74,426 $ 2,352,675 $ (649,588) $ 10,960,015 ============== ============== ============ ============= ============== ============== Book value per common share (Note 5) $ 16.33 $ 14.01 $ 31.69 ============== ============== ============== Common shares outstanding (Note 5) 128,211 47,435 168,855 ============== ============== ==============
See Accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet. 2 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 (Unaudited) 1. STOCK OPTIONS EXERCISES At June 30, 2006, Shurgard had approximately 2,439,196 stock options outstanding. All outstanding Shurgard stock options were immediately vested as of the close of the merger, and holders received 0.82 options exercisable for shares of Public Storage common stock for each Shurgard option owned, representing approximately 2,000,141 Public Storage stock options. Following the merger, terminated employees exercised approximately 1,747,000 of these stock options, and Public Storage received aggregate proceeds upon exercise of $74,426,000. Accordingly, the following pro forma adjustments have been recorded to reflect these option exercises:
Amounts in thousands ------------ Cash and cash equivalents has been increased to reflect the net proceeds $74,426 ============ Common stock has been increased to reflect the par value of the 1,747,000 common shares that were issued $ 175 ============ Paid in capital has been increased to reflect the remaining net proceeds in excess of par value $74,251 ============
2. PRO FORMA MERGER ADJUSTMENTS: The merger was accounted for using the purchase method of accounting. The total purchase price has been allocated on a preliminary basis, subject to further evaluation, to the acquired assets and liabilities based upon their respective estimated fair values. Pursuant to the merger, Shurgard was merged into a subsidiary of Public Storage, and Public Storage issued to Shurgard shareholders 0.82 of a share of Public Storage common stock in exchange for each Shurgard common share that they owned. In connection with the merger, all outstanding Shurgard stock options were immediately vested as of the close of the merger. Holders of Shurgard's stock options each received options exercisable for shares of Public Storage common stock on a basis of 0.82 of a Public Storage option for each Shurgard option owned. In connection with the merger, Shurgard's line of credit was repaid and all of its preferred stock was redeemed at liquidation value plus any accrued and unpaid distributions. In addition, Public Storage repaid certain outstanding notes payable of Shurgard totaling $67.0 million as of June 30, 2006. Public Storage funded these activities with cash on-hand. The purchase price of the net assets was equal to the fair value of the Public Storage common stock issued combined with the direct costs associated with the merger. In determining the fair value of the Public Storage common stock issued in the merger a share price of $79.97, less estimated cost of issuing such shares, has been used in these pro forma financial statements. The $79.97 per common share was based on the average closing price of a share of Public Storage common stock on the New York Stock Exchange for the period between the five business days before and the five business days after the announcement of the merger (March 7, 2006) where closing prices varied between a high of $82.98 and a low of $77.17 per common share. Direct costs related to the merger paid at the merger date or shortly thereafter were approximately $56.4 million: consisting of (i) financial advisory, legal, accounting, and other miscellaneous expenses totaling approximately $37.4 million, and (ii) severance payments to Shurgard management based on contractual change of control provisions of approximately $19.0 million; such severance payments relate specifically to management who were terminated on or immediately following the consummation of the merger. 3 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 (Unaudited) The following reflects the preliminary determination of purchase price, and the allocation of the purchase price to the net assets acquired.
Amounts in thousands, except share price and conversion ratio ----------------- PURCHASE PRICE: Outstanding Shurgard common shares at June 30, 2006 47,435 Conversion ratio into Public Storage common stock 0.82 ----------------- Pro forma Public Storage common shares issued 38,897 Fair value of Public Storage common stock $ 79.97 ----------------- Aggregate fair value of Public Storage common stock $ 3,110,593 Less estimated issuance costs (736) ----------------- Adjusted aggregate fair value of Public Storage common stock issued $ 3,109,857 Estimated intrinsic value (which approximates fair value) of Shurgard outstanding stock options at June 30, 2006 72,768 Estimated direct costs of the merger 56,446 ----------------- Total Purchase Price $ 3,239,071 ================= PRELIMINARY ALLOCATION OF PURCHASE PRICE: Cash and cash equivalents $ 40,938 Operating real estate facilities 5,071,375 Construction in process 77,396 Properties held for sale 3,893 Restricted cash 3,236 Intangible assets 384,716 Other assets 90,295 Accrued and other liabilities (153,514) Lines of credit (626,700) Notes payable (1,370,635) Minority interest (145,679) Preferred stock (136,250) ----------------- Total allocated Purchase Price to net assets acquired $ 3,239,071 =================
4 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 (Unaudited) 3. PRO FORMA PURCHASE PRICE ADJUSTMENTS: The following pro forma adjustments have been made to reflect the above Purchase Price of the merger as of June 30, 2006: (Amounts in thousands)
Cash and cash equivalents have been reduced to reflect: o Repayment of outstanding borrowings under Shurgard's line of credit as of June 30, 2006 $ (626,700) o Repay notes payable as of June 30, 2006 (67,000) o Redemption of Shurgard's preferred stock as of June 30, 2006 (136,250) o Estimated direct costs and expenses of the merger (56,446) -------------- $ (886,396) ============== Line of credit has been decreased to reflect the repayment of outstanding borrowings under Shurgard's line of credit as of June 30, 2006 $ (626,700) ============== Notes payable has been decreased to reflect the repayment of outstanding borrowings of Shurgard as of June 30, 2006 $ (67,000) ============== Preferred stock has been decreased to reflect the redemption of Shurgard's outstanding preferred stock at liquidation value $ (136,250) ============== Common stock has been increased to reflect the issuance of 38.9 million shares of Public Storage common stock with a par value of $0.10 per share $ 3,890 ============== Paid-in capital has been increased to reflect: o the issuance of common stock at fair value in excess of par value $ 3,105,967 o the intrinsic value (which approximates fair value) of the Shurgard stock options 72,768 -------------- $ 3,178,735 ==============
5 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 (Unaudited) 4. PRO FORMA VALUATION ADJUSTMENTS: The following pro forma adjustments have been made to reflect the preliminary allocation of the Purchase Price to the net assets acquired as of June 30, 2006:
(Amounts in thousands) Operating real estate facilities has been increased to reflect the fair value of -------------- the real estate facilities acquired in the merger (purchase price allocation of $5,071,375,000 less Shurgard's historical net book value of $2,797,425,000) $ 2,273,950 ============== Goodwill has been reduced to eliminate Shurgard's historical balance $ (27,440) ============== Intangible assets has been increased to reflect the estimated value of Shurgard's existing customer base $ 384,716 ============== Other assets has been reduced to reflect no allocation of the Purchase price associated with Shurgard's historical unamortized financing costs and other miscellaneous assets $ (41,743) ============== Notes payable has been increased to adjust Shurgard's historical balances to estimated fair value $ 15,315 ============== Accrued and other liabilities has been reduced to eliminate accrued expenses incurred by Shurgard with respect to the exploration of strategic alternatives $ (360) ============== Preferred stock has been increased to reflect Shurgard's historical carrying amounts at liquidation value $ 5,067 ============== Shurgard's historical equity has been eliminated as follows: Common stock $ (47) ============== Paid-in-capital $(1,156,916) ============== Accumulated deficit $ 501,327 ============== Accumulated other comprehensive income $ (13,974) ==============
5. BOOK VALUE PER SHARE OF COMMON STOCK Book value per common share has been determined by dividing total shareholders' equity less the liquidation value of the Preferred Stock and the Equity Stock, Series A by the outstanding common shares. The following summarizes the pro forma common shares outstanding:
Public Storage's historical common shares outstanding at June 30, 2006 128,211 Public Storage common shares issued in connection with stock option exercises (see Note 1 above) 1,747 Pro forma Public Storage common shares issued to shareholders of Shurgard (see Note 2 above) 38,897 ------------- Pro forma Public Storage common shares outstanding 168,855 =============
6 PUBLIC STORAGE, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For The Year Ended December 31, 2005 (Unaudited) (Amounts in thousands, except per share data)
Pro forma adjustments - issuance of preferred stock Pro forma Shurgard and exercise of Pro forma Merger Public Storage Storage stock options Reclassifications Adjustments Public Storage, Inc. Centers, Inc. (Note 1) (Note 2) (Note 3) Inc. --------------- -------------- --------------- ----------------- ------------ ---------------- Historical Historical Pro Forma Revenues: Rental income: Self-storage facilities $ 952,284 $ -- $ -- $ 453,964 $ -- $ 1,406,248 Commercial and containerized storage 28,057 -- -- -- -- 28,057 Storage centers operations -- 478,970 -- (478,970) -- -- Ancillary operations 64,173 -- -- 27,336 -- 91,509 Interest and other income 16,447 4,922 -- 1,416 (9,512) 13,273 --------------- -------------- --------------- ----------------- ------------ ---------------- 1,060,961 483,892 -- 3,746 (9,512) 1,539,087 --------------- -------------- --------------- ----------------- ------------ ---------------- Expenses: Cost of operations: Self-storage facilities 320,919 -- -- 223,343 -- 544,262 Commercial and containerized storage 17,334 -- -- -- -- 17,334 Ancillary operations 40,378 -- -- 9,663 -- 50,041 Operating -- 233,006 -- (233,006) -- -- Real estate development -- 10,042 -- -- -- 10,042 Depreciation and amortization 196,397 95,722 -- -- 330,218 622,337 Impairment and abandoned project expense -- 3,354 -- -- -- 3,354 General and administrative 21,115 35,318 -- -- (22,742) 33,691 Interest expense 8,216 -- -- 105,584 (39,057) 74,743 --------------- -------------- --------------- ----------------- ------------ ---------------- 604,359 377,442 -- 105,584 268,419 1,355,804 --------------- -------------- --------------- ----------------- ------------ ---------------- Other Income (Expense): Costs related to takeover proposal and exploration of strategic alternatives -- (13,775) -- -- -- (13,775) Interest expense -- (105,584) -- 105,584 -- -- Loss on derivatives, net -- (2,122) -- -- -- (2,122) Foreign exchange loss -- (9,665) -- -- -- (9,665) Interest income and other -- 3,746 -- (3,746) -- -- --------------- -------------- --------------- ----------------- ------------ ---------------- Other expense, net -- (127,400) -- 101,838 -- (25,562) --------------- -------------- --------------- ----------------- ------------ ---------------- Income (loss) from continuing operations before the following items 456,602 (20,950) -- -- (277,931) 157,721 Equity in earnings of real estate entities 24,883 60 -- -- -- 24,943 Casualty loss (1,917) -- -- -- -- (1,917) Gain on disposition of real estate and real estate investments 3,099 -- -- -- -- 3,099 Minority interest in income (loss) (32,651) 20,936 (7,250) -- -- (18,965) Income tax expense -- (636) -- -- -- (636) --------------- -------------- --------------- ----------------- ------------ ---------------- Income (loss) from continuing operations $ 450,016 $ (590) $ (7,250) $ -- $ (277,931) $ 164,245 =============== ============== =============== ================= ============ ================ Earnings (loss) per common share from continuing operations (Note 4): Basic $ 1.94 $ (0.27) $ (0.45) Diluted $ 1.93 $ (0.27) $ (0.45) Weighted average shares outstanding (Note 4): Basic 128,159 46,660 1,747 (8,399) 168,167 Diluted 128,819 46,660 1,747 (9,059) 168,167
See Accompanying Notes to Pro Forma Condensed Consolidated Statements of Income. 7 PUBLIC STORAGE, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Six Months Ended June 30, 2006 (Unaudited) (Amounts in thousands, except per share data)
Pro forma adjustments issuance of preferred stock and Pro forma Shurgard exercise of Pro forma Merger Public Storage Storage stock options Reclassifications Adjustments Public Storage, Inc. Centers, Inc. (Note 1) (Note 2) (Note 3) Inc. --------------- -------------- --------------- ----------------- -------------- ---------------- Historical Historical Pro Forma Revenues: Rental income: Self-storage facilities $ 513,910 $ -- $ -- $ 248,516 $ -- $ 762,426 Commercial and containerized storage 14,135 -- -- -- -- 14,135 Storage centers operations -- 261,933 -- (261,933) -- -- Ancillary operations 33,543 -- -- 14,636 -- 48,179 Interest and other income 15,122 1,931 -- (350) (6,764) 9,939 --------------- -------------- --------------- ----------------- -------------- ---------------- 576,710 263,864 -- 869 (6,764) 834,679 --------------- -------------- --------------- ----------------- -------------- ---------------- Expenses: Cost of operations: Self-storage facilities 177,160 -- -- 117,010 -- 294,170 Commercial and containerized storage 10,112 -- -- -- -- 10,112 Ancillary operations 22,312 -- -- 5,594 -- 27,906 Operating -- 122,604 -- (122,604) -- -- Real estate development -- 3,615 -- -- -- 3,615 Depreciation and amortization 98,675 52,265 -- -- 79,676 230,616 Impairment and abandoned project expense -- 800 -- -- -- 800 General and administrative 13,754 14,471 -- -- (8,360) 19,865 Interest expense 3,429 -- -- 60,249 (25,946) 37,732 --------------- -------------- --------------- ----------------- -------------- ---------------- 325,442 193,755 -- 60,249 45,370 624,816 --------------- -------------- --------------- ----------------- -------------- ---------------- Other Income (Expense): Costs related to proposed merger -- (2,828) -- -- -- (2,828) Interest expense -- (60,249) -- 60,249 -- -- Gain on derivatives, net -- 1,109 -- -- -- 1,109 Foreign exchange gain -- 503 -- -- -- 503 Interest income and other -- 869 -- (869) -- -- --------------- -------------- --------------- ----------------- -------------- ---------------- Other expense, net -- (60,596) -- 59,380 -- (1,216) --------------- -------------- --------------- ----------------- -------------- ---------------- Income (loss) from continuing operations before the following items 251,268 9,513 -- -- (52,134) 208,647 Equity in earnings of real estate entities 6,590 -- -- -- -- 6,590 Minority interest in (income) loss (15,887) 7,886 (2,578) -- -- (10,579) Income tax expense -- (94) -- -- -- (94) --------------- -------------- --------------- ----------------- -------------- ----------------- Income (loss) from continuing operations $ 241,971 $ 17,305 $ (2,578) $ -- $ (52,134) $ 204,564 =============== ============== =============== ================= ============== ================= Earnings per common share from continuing operations (Note 4): Basic $ 1.03 $ 0.23 $ 0.49 Diluted $ 1.03 $ 0.23 $ 0.48 Weighted average shares outstanding (Note 4): Basic 128,151 47,089 1,747 (8,476) 168,511 Diluted 129,037 48,232 891 (8,682) 169,478
See Accompanying Notes to Pro Forma Condensed Consolidated Statements of Income. 8 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited) 9 1. PRO FORMA ADJUSTMENTS FOR THE ISSUANCE OF PREFERRED SECURITIES AND EXERCISE OF STOCK OPTIONS: On May 3, 2006, Public Storage issued shares of its 7.25% Cumulative Preferred Stock, Series I, for gross proceeds of approximately $517.5 million (net proceeds of approximately $501.6 million). In addition, on May 9, 2006, one of Public Storage's consolidated subsidiaries issued partnership units of its 7.25% Cumulative Preferred Units, Series J, for gross proceeds of $100.0 million (net proceeds also $100.0 million). The aggregate net proceeds from these transactions were used to fund the cash requirements of the merger. In connection with the merger, all outstanding Shurgard stock options were immediately vested as of the close of the merger, and holders each received options exercisable for shares of Public Storage common stock on a basis of 0.82 of a Public Storage option for each Shurgard option owned, representing approximately 2,000,141 Public Storage stock options. Following the merger, 1,747,000 of these stock options were exercised, and the Company received aggregate proceeds upon exercise of $74,426,000. The following pro forma adjustment has been made to reflect the impact of the issuance of the aforementioned issuance of preferred units:
Year ended Six months ended December 31, 2005 June 30, 2006 ------------------- ------------------ (Amounts in thousands) "Minority interest in income" has been increased to reflect the allocation of income with respect to the 7.25% Cumulative Preferred Units, Series J assuming such securities were outstanding as of the beginning of 2005 $ (7,250) $ (2,578) =================== ==================
See note 4, "Pro Forma Earnings per Common Share," for the pro forma adjustments to reflect the additional allocation of income associated with the issuance of the 7.25% Cumulative Preferred Stock, Series I and the impact on weighted average shares outstanding of the aforementioned issuance of 1,747,000 Public Storage common shares upon the exercise of stock options. 2. PRO FORMA RECLASSIFICATION ADJUSTMENTS: Reclassification adjustments have been made to certain Shurgard's historical amounts to conform to Public Storage's presentation as follows:
Year ended Six months ended December 31, 2005 June 30, 2006 ------------------- --------------------- (Amounts in thousands) "Rental income: Self-storage facilities" has been increased to reflect rental income reclassified from "Storage center operations" $ 453,964 $ 248,516 =================== ===================== "Storage center operations" has been decreased to reflect : o Rental income reclassified to "Rental income: Self-storage facilities" $ (453,964) $ (248,516) o Income from tenant reinsurance activities has been reclassified to "Revenues: Ancillary operations" (8,105) (4,694) o Retail sales and truck rental income reclassified to "Revenues: Ancillary operations" (16,901) (8,723) ------------------- --------------------- $ (478,970) $ (261,933) =================== =====================
9 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited)
Year ended Six months ended December 31, 2005 June 30, 2006 ------------------- ---------------------- (Amounts in thousands) "Revenues: Ancillary operations" has been increased to reflect : o Retail sales and truck rental income included in "Storage center operations" $ 16,901 $ 8,723 o Income from tenant reinsurance activities included in "Revenues: Storage center operations" 8,105 4,694 o Income from tenant reinsurance activities included in "Interest and other income" 2,330 1,219 ------------------- --------------------- $ 27,336 $ 14,636 =================== =====================
10 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited)
Year ended Six months December 31, ended June 30, 2005 2006 ------------------ ------------------- (Amounts in thousands) -------------------------------------- "Interest and other income" has been increased (decreased) to reflect: o Income from tenant reinsurance activities reclassified to "Ancillary operations" $ (2,330) $ (1,219) o Reclassification of Shurgard's interest and other income included the caption "Other Income (Expense)" to "Interest and under other income" under the caption "Revenues" 3,746 869 ------------------ ------------------- $ 1,416 $ (350) ================= =================== "Cost of operations: Self-storage facilities" has been increased to reflect cost of operations included in "Expenses: Operating" $ 223,343 $ 117,010 ================= =================== "Cost of operations: Ancillary operations" has been increased to reflect cost of operations with respect to retail sales, rental trucks, and tenant reinsurance included in "Expenses: Operating" $ 9,663 $ 5,594 ================= =================== "Expenses: Operating" has been decreased to reflect : o Cost of operations reclassified to "Cost of operations: Self-storage facilities" $ (223,343) $ (117,010) o Retail sales, rental trucks, and tenant reinsurance reclassified to "Cost of Operations: Ancillary operations" (9,663) (5,594) ----------------- ------------------- $ (233,006) $ (122,604) ================= =================== "Expenses: Interest expense" has been increased to reflect the reclassification of Shurgard's historical interest expense included "Other Income (Expense): Interest expense" $ 105,584 $ 60,249 ================= =================== "Other Income (Expense): Interest expense" has been decreased to reflect the reclassification of Shurgard's historical interest expense to "Expenses: Interest expense" $ 105,584 $ 60,249 ================= =================== "Other Income (Expense): Interest income and other" has been decreased to reflect the reclassification of Shurgard's historical amounts to "Revenues: Interest and other income" $ (3,746) $ (869) ================= ===================
11 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited) 3. PRO FORMA MERGER ADJUSTMENTS: In connection with the merger, borrowings under Shurgard's line of credit were repaid ($626.7 million), certain Shurgard borrowings under notes payable were repaid ($67.0 million), Shurgard's outstanding preferred stock was redeemed at liquidation value ($136.3 million), and we incurred merger related costs of approximately $56.4 million. These capital requirements were funded with the aforementioned issuances of our Series I Perpetual Preferred Stock, our Series J Perpetual Preferred Units, and cash on-hand. The following pro forma adjustments have been recorded to reflect the impact of the above related merger financing:
Year ended Six months ended December 31, 2005 June 30, 2006 -------------------- ------------------- (Amounts in thousands) Interest expense was reduced to reflect: o Elimination of historical interest expense with respect to Shurgard's line of credit which is assumed to have been repaid at the beginning of 2005 $ (22,832) $ (17,572) o Elimination of historical interest expense with respect to certain of Shurgard's notes payable which is assumed to have been repaid at the beginning of 2005 (4,064) (2,127) o Elimination of Shurgard's historical amortization of debt issuance costs (8,336) (4,342) o Amortization of the pro forma loan premium resulting from recording Shurgard debt at fair value in connection with the purchase price allocation (3,825) (1,905) -------------------- ------------------- $ (39,057) $ (25,946) ==================== =================== A pro forma adjustment was made to reduce historical interest income earned to reflect the pro forma use of cash on hand to finance the merger rather than remaining in interest-bearing accounts $ (9,512) $ (6,764) ==================== ===================
12 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited)
Year ended Six months ended December 31, June 30, 2005 2006 ---------------- ------------------- (Amounts in thousands) Pro forma adjustments have been made to depreciation and amortization expense to: o Eliminate Shurgard's historical depreciation and amortization expense $ (95,722) $ (52,265) o Record depreciation expense based on the purchase price allocated to real estate facilities. Depreciation was calculated based on an expected useful life of 25 years assuming approximately 80% of the fair value allocated to Shurgard's real estate facilities was allocated to buildings and 20% allocated to land. This allocation is based on Shurgard's existing portfolio and is subject to change based on final evaluations. 162,284 81,142 o Record amortization of intangible assets based on the purchase price allocated to existing customer base in place. Amortization was calculated based upon the increased net operating income to be received assuming the current tenant base is in place, as compared to the net operating income that would be achieved were the facilities acquired with no tenant base in place. Future amortization will decline substantially to approximately $77,301 in the second year following the merger, $17,728 in the third year following the merger, and an aggregate of $26,031 in ensuing years. 263,656 50,799 ---------------- ------------------- $ 330,218 $ 79,676 ================ =================== Pro forma adjustments have been recorded to reduce general and administrative expenses for expenses that we expect to eliminate as a result of the merger, including $6,186,000 for the year ended December 31, 2005 and $4,197,000 for the six months ended June 30, 2006 in salaries for those personnel that were terminated on or immediately following the consummation of the merger; $9,400,000 for the year ended December 31, 2005 and $2,125,000 for the six months ended June 30, 2006 in duplicative audit fees and SOX compliance costs that will be no longer incurred on a go-forward basis following the merger; and $7,156,000 for the year ended December 31, 2005 and $2,038,000 for the six months ended June 30, 2006 in other miscellaneous duplicative costs associated with being a public company such as board of director costs and investor services costs. $ (22,742) $ (8,360) ================ ===================
13 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited) Public Storage believes that there will be certain cost efficiencies due to the economies of scale of having a larger number of facilities in certain markets after the merger is consummated. Public Storage expects such cost efficiencies in telephone directory advertising, property insurance, and payroll cost with respect to supervisory personnel. In addition, some of Shurgard's facilities will be subject to property tax reappraisal resulting in increases to property tax expense. Public Storage is evaluating the potential cost savings and increase in property taxes; however, it is not able to quantify the amount of such savings or costs at this time. Accordingly, no adjustments have been made to the pro forma condensed consolidated statement of income to reflect expected cost savings or increases to property taxes. 4. PRO FORMA EARNINGS PER COMMON SHARE: For purposes of determining earnings per common share on both basic and diluted basis, income (loss) from continuing operations was allocated to preferred shareholders, Equity Stock, Series A shareholders and common shareholders as follows:
Pro forma Issuance of Pro forma Public Shurgard Preferred Pro forma Merger Public Storage, Storage Centers, Securities Reclassification Adustments Storage, Inc. Inc. (Note 1) (Note 2) (Note 3) Inc. ------------- ----------------- -------------- ---------------- ------------- -------------- Historical Historical Pro Forma (Amounts in thousands) FOR THE YEAR ENDED DECEMBER 31, 2005: Allocation of income (loss) from continuing operations: To preferred shareholders and other $ 180,555 $ 12,153 $ 37,519 $ -- $ (12,153) $ 218,074 To equity stock, Series A shareholders 21,443 -- -- -- -- 21,443 To common shareholders 248,018 (12,743) (44,769) -- (265,778) (75,272) ------------- ----------------- -------------- ---------------- ------------- -------------- Total income from continuing operations $ 450,016 $ (590) $ (7,250) $ -- $ (277,931) $ 164,245 ============= ================= ============== ================ ============== ============== FOR THE SIX MONTHS ENDED JUNE 30, 2006: Allocation of income from continuing operations: To preferred shareholders and other $ 98,991 $ 6,072 $ 12,715 $ -- $ (6,072) $ 111,706 To equity stock, Series A shareholders 10,712 -- -- -- -- 10,712 To common shareholders 132,268 11,233 (15,293) -- (46,062) 82,146 ------------- ----------------- -------------- ---------------- ------------- -------------- Total income from continuing operations $ 241,971 $ 17,305 $ (2,578) $ -- $ (52,134) $ 204,564 ============= ================= ============== ================ ============== ==============
As indicated in Note 1, Public Storage issued approximately $517.5 million of its 7.25% Cumulative Preferred Stock during the quarter ended June 30, 2006. The net proceeds from this issuance were used to finance the cash requirements of the merger. Pro forma merger adjustments totaling $37,519,000 and $12,715,000 have been made in the above table to allocate income from continuing operations to such securities, to the extent they are not reflected in the period's operating results, for the year ended December 31, 2005 and the six months ended June 30, 2006, respectively. In connection with the merger, Shurgard's preferred stock was redeemed. As a result, pro forma merger adjustments were made to eliminate historical income allocated to such securities totaling $12,153,000 and $6,072,000 for the year ended December 31, 2005 and the six months ended June 30, 2006 respectively. 14 PUBLIC STORAGE, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2005 and Six Months Ended June 30, 2006 (Unaudited) Historical weighted average shares outstanding were for each of the periods to reflect the exchange of Shurgard shares for Public Storage shares on the basis of an 0.82 exchange ratio, as well as to reflect the exercise of stock options described in Note 1 above. These adjustments are described as follows:
For the Year Ended For the Six Months December 31, 2005 June 30, 2006 ------------------------ ----------------------- Basic Diluted Basic Diluted ----------- ------------ ----------- ----------- (Amounts in thousands, except conversion ratio) Pro forma adjustments have been made to weighted average shares outstanding due to the exercise of stock options: Increase in common shares outstanding for shares exercised 1,747 1,747 1,747 1,747 Decrease in weighted average stock options outstanding included in the historical reported amounts, because the stock options are assumed to be exercised and no longer outstanding (no adjustment is necessary for diluted shares for the year ended December 31, 2005 because no weighted average stock options were included in Shurgard's weighted average shares) -- -- -- (856) ----------- ------------ ----------- ----------- Total pro forma adjustment for stock option exercise 1,747 1,747 1,747 891 =========== ============ =========== =========== Pro forma adjustments have been made to weighted average shares outstanding to reflect the conversion of Shurgard shares to Public Storage shares, as follows: Shurgard historical weighted average shares outstanding. 46,660 46,660 47,089 48,232 Conversion ratio 0.82 0.82 0.82 0.82 ----------- ------------ ----------- ----------- Pro forma weighted average shares 38,261 38,261 38,613 39,550 Less historical Shurgard weighted average shares (46,660) (46,660) (47,089) (48,232) Less adjustment to eliminate outstanding Public Storage stock options and restricted stock from diluted shares, because there is a pro-forma loss allocable to common shareholders for the year ended December 31, 2005, and inclusion would be anti-dilutive -- (660) -- -- ----------- ------------ ----------- ----------- Pro forma merger adjustment (8,399) (9,059) (8,476) (8,682) =========== ============ =========== ===========
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