Public Storage 2003 Annual Report Download - page 113

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PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-34
Accounting principles generally accepted in the United States permit, but do not require, companies to
recognize compensation expense for stock-based awards based on their fair value at date of grant, which is then
amortized as compensation expense over the vesting period (the Fair Value Method). Companies can also
elect to disclose, but not recognize as an expense, stock option expense when stock options are granted to
employees at an exercise price equal to the market price at the date of grant (the APB 25 Method).
For periods prior to December 31, 2001, we utilized the APB 25 Method of accounting for employee
stock options. As of January 1, 2002, we adopted the Fair Value Method, and have elected to use the
prospective method of transition, whereby the Company applies the recognition provisions of the Fair Value
Method to all stock options granted after the beginning of the fiscal year in which the Company adopts such
method. Accordingly, we recognize compensation expense in our income statement using the Fair Value
Method only with respect to stock options issued after January 1, 2002.
The following table sets forth financial disclosures with respect to the accounting for stock options:
For the years ended December 31,
Selected information with respect to employee stock options 2003 2002 2001
Average estimated value per option granted, utilizing the Black-
Scholes method ................................................................................
$1.95
$1.86
$1.48
Assumptions used in valuing options with the Black-Scholes
method:
Expected life of options in years................................................ 5 5 5
Risk-free interest rate................................................................. 3.0% 3.2% 4.1%
Expected volatility ..................................................................... 0.180 0.170 0.155
Expected dividend yield............................................................. 7.0% 7.0% 7.0%
Net income information with respect to each year
Net income, as reported.................................................................... $336,653 $318,738 $324,208
Add back: stock-based employee compensation expense included in
net income ...................................................................................
530
163
-
Less: stock-based employee compensation cost that would have been
included if the fair value method were applied for all awards.....
(3,311)
(3,595)
(4,176)
Net income, assuming consistent application of the fair value
method.........................................................................................
$333,872
$315,306
$320,032
Earnings per share, as reported:
Basic ........................................................................................... $1.29 $1.15 $1.41
Diluted......................................................................................... $1.28 $1.14 $1.39
Earnings per share, assuming consistent application of the fair
value method
Basic ........................................................................................... $1.27 $1.12 $1.37
Diluted......................................................................................... $1.26 $1.11 $1.36