Public Storage 2003 Annual Report Download - page 89

PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-10
Included in depreciation and amortization expense for 2003, 2002 and 2001 is $7,610,000, $4,503,000,
and $3,606,000 respectively, related to depreciation of other assets. Included in discontinued operations for
2003, 2002, and 2001, respectively, is depreciation expense of $1,461,000, $2,518,000, and $2,245,000
respectively, related to depreciation of containers and equipment of the discontinued operations of the
containerized storage business.
Other assets at December 31, 2003 also includes investments totaling $27,995,000 ($13,801,000 at
December 31, 2002) in held to maturity debt securities owned by STOR-Re (see Note 3) stated at amortized
cost, which approximates fair value.
Accrued and other liabilities
Accrued and other liabilities consist primarily of trade payables, real and personal property tax
accruals, accrued interest, and losses and loss adjustment liabilities, as discussed below.
STOR-Re (see Note 3), provides limited property and liability insurance coverage to the Company and
affiliates of the Company. This entity accrues liabilities for losses and loss adjustment expense, which at
December 31, 2003 totaled $28,741,000 ($22,911,000 at December 31, 2002). PS Insurance Company, Ltd.
reinsures policies against claims for losses to goods stored by tenants in our self-storage facilities (see Note 3).
This entity accrues liabilities for losses and loss adjustment expense, which at December 31, 2003 totaled
$2,486,000 ($2,135,000 at December 31, 2002).
Liabilities for losses and loss adjustment expenses include an amount determined from loss reports and
individual cases and an amount, based on recommendations from an outside actuary using a frequency and
severity method, for losses incurred but not reported. Determining the liability for unpaid losses and loss
adjustment expense is based upon estimates and while we believe that the amount is adequate, the ultimate loss
may be in excess of or less than the amounts provided. The methods for making such estimates and for
establishing the resulting liability are continually reviewed.
The Company, STOR-Re, and its affiliates maximum aggregate annual exposure for losses that are
below the deductibles set forth in the third-party insurance contracts, assuming multiple significant events
occur, is approximately $30 million. In addition, if losses exhaust the third-party insurers limit of coverage of
$125,000,000 for property coverage and $101,000,000 for general liability, our exposure could be greater.
These limits, however, are higher than estimates of maximum probable losses that could occur from individual
catastrophic events (i.e., earthquake and wind damage) determined in recent engineering and actuarial studies.
PS Insurance Company, Ltd. has outside third-party insurance coverage for losses from any individual
event that exceeds a loss of $500,000, to a limit of $10,000,000. Losses below the third-party insurers
deductible amounts are accrued as cost of operations for the tenant reinsurance operations.
Intangible assets and goodwill
Intangible assets consist of property management contracts ($165,000,000) and the excess of the
acquisition cost over the fair value of net tangible and identifiable intangible assets or goodwill ($94,719,000)
acquired in business combinations.
Prior to January 1, 2002, we amortized goodwill using the straight-line method over 25 years.
Goodwill on our balance sheet has an indeterminate life and, in accordance with the provisions of Statement of
Financial Accounting Standards No. 142, amortization of goodwill ceased effective January 1, 2002. Our other
intangibles have a defined life and continue to be amortized over 25 years. Had we continued to amortize
goodwill in 2002 and 2003 as we did in 2001, net income would have been reduced by $2,705,000 in each year