Public Storage 2002 Annual Report Download

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Our spaces are part of great places.
Our spaces are part of great places.
Our spaces are part of great places.
Public Storage, Inc. 2002 Annual Report
Public Storage, Inc. 2002 Annual Report

Table of contents

  • Page 1
    Public Storage, Inc. 2002 Annual Report Our spaces are part of great places.

  • Page 2
    ...,000 Location Nebraska Nevada New Hampshire New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas Utah Virginia Washington Wisconsin Totals (1) Storage and properties combining self-storage and commercial space. Number of Properties(1) 1 22...

  • Page 3
    ... to the Company's consolidated financial statements. (2) During the year ended December 31, 2002, the Company adopted a business plan that included the closure of certain non-strategic containerized storage facilities (the "Closed Facilities."). The historical operations of the Closed Facilities are...

  • Page 4
    ... containerized storage business. 3. Nominal yields on development properties in "fill-up" and continued dilution from build out of our development pipeline. 4. Offset in part by income from the acquisition of a tenant reinsurance business and additional real estate investments during 2001 and 2002.

  • Page 5
    ... discounts. The strategy appeared to work in the first three quarters of 2001; however, during the fourth quarter of 2001 and through February of 2002, there was a rapid decline in occupancy levels. This reduction in occupancy level coincided with a reduction in call volume to our national telephone...

  • Page 6
    ...continued significant discounting, including one dollar for the first month promotional specials and higher advertising costs, offset in part by slightly higher occupancies. In addition, we will continue to experience higher operating costs, including snow removal, payroll, marketing, property taxes...

  • Page 7
    ... developments and expansions are subject to significant contingencies. Seventeen of these new developments are located in major cities on the Eastern Seaboard with the balance in California and Hawaii. During 2002, we acquired nine facilities from unaffiliated owners made up of 502,000 square feet...

  • Page 8
    ...will be successful. Tenant Insurance: At the end of 2001, we acquired PS Insurance Company from the Hughes family. This company reinsures policies against losses to goods stored by tenants in our self-storage facilities. After tax net income was approximately $10.5 million for 2002. Other Highlights...

  • Page 9
    ... the ability to provide exceptional service. The industry participants that excel at delivering good value to their customers should also provide above average returns to their owners. Your company, Public Storage, has an incredible franchise and our entire management team is focused on optimizing...

  • Page 10
    ... - our share of PSB's gain on sale of real estate Depreciation from unconsolidated real estate investments Minority interest in income Net cash provided by operating activities FFO to minority interests - common FFO to minority interest - preferred Funds from operations Senior Preferred Equity Stock...

  • Page 11
    ... Number: 1-8389 PUBLIC STORAGE, INC. (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation or organization) 701 Western Avenue, Glendale, California (Address of principal executive offices) Registrant's telephone number, including area code...

  • Page 12
    ...,113,000 (computed on the basis of $37.10 per share which was the reported closing sale price of the Company's Common Stock on the New York Stock Exchange on June 30, 2002). Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series A, $.01 Par Value - $208,710,000 (computed on...

  • Page 13
    ... revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report. General Public Storage, Inc. (the "Company") is an equity real estate investment trust ("REIT") organized as a corporation under the laws of California on July 10, 1980. We...

  • Page 14
    ... market cycles. Our executive management team and their years of experience with the Company are as follows: Harvey Lenkin (66), President and Chief Operating Officer; 25 years; John Reyes (42), Chief Financial Officer, 12 years; and Marvin M. Lotz (60), Senior Vice President - Real Estate Division...

  • Page 15
    ... insurance program: On December 31, 2001, the Company purchased all of the capital stock of PS Insurance Company, Ltd., from Mr. Hughes and members of his family. This insurance company reinsures policies issued to our customers against loss or damage goods stored by tenants in the Company's storage...

  • Page 16
    ... expense levels. We believe that our property management personnel and systems, combined with the national telephone reservation system, will continue to enhance our ability to meet these goals. Acquire properties operated and partially owned by the Company: In addition to our wholly owned storage...

  • Page 17
    ... common stock. On March 17, 1998, the private REIT merged into Public Storage Properties XI, Inc., a publicly traded REIT and an affiliate of the Company and the name of the surviving corporation was changed to PS Business Parks, Inc. (the REIT and the related Operating Partnership are hereinafter...

  • Page 18
    ...,497,020 shares of common stock at an aggregate cost of approximately $535,862,000. In addition, in 2001 and 2002, we redeemed or repurchased $636.9 million of our senior preferred stock and $80,000,000 of our preferred partnership units for cash, representing a refinancing of these securities into...

  • Page 19
    .... If PSAC Storage Investors, LLC does not elect to cause an early termination, Mr. Hughes' 1% interest can increase to up to 10%. Disposition of properties: The Company is presently evaluating the sale of certain facilities, which are located in non-strategic markets and locations, which are...

  • Page 20
    • Our partial ownership interests primarily reflect general and limited partnership interests in entities that own self-storage facilities that are operated by the Company. Additional acquired interests in real estate (other than the acquisition properties from third parties) will include common ...

  • Page 21
    ... Public Storage German Fund II, Ltd. (2) Public Storage Institutional Fund Public Storage Institutional Fund II (10) Public Storage Institutional Fund III Public Storage Institutional Fund IV (10) Public Storage Pickup & Delivery, L.P. STOR-Re Mutual Insurance Company, Inc. Storage Trust Properties...

  • Page 22
    ... 0.5% of the common shares of PS Business Parks, Inc. (4) B. Wayne Hughes owns approximately 17.9% of the general partnership interest of this entity. (5) The Hughes Family owns approximately 24.3% of the limited partnership interests of this entity. (6) The Hughes Family owns approximately 11.9% of...

  • Page 23
    ... that provides certain administrative and cost-sharing services to the Company and other owners of properties operated by the Company. Federal Income Tax We believe that we have operated, and intend to continue to operate, in such a manner as to qualify as a REIT under the Internal Revenue Code of...

  • Page 24
    ...provide, however, that the Hughes family may continue to own the shares of our common stock held by them at the time of the 1995 reorganization. These limitations are designed, to the extent possible, to avoid a concentration of ownership that might jeopardize our ability to qualify as a real estate...

  • Page 25
    ... board of directors, cash distributions in preference to holders of our common stock and Equity Stock, Series A. Since our business consists primarily of acquiring and operating real estate, we are subject to real estate operating risks. The value of our investments may be reduced by general risks...

  • Page 26
    ...many of our properties are located from other self-storage facilities and other storage alternatives is significant and has affected the occupancy levels, rental rates and operating expenses of some of our properties. Any increase in availability of funds for investment in real estate may accelerate...

  • Page 27
    ... mini-warehouses. There may be conflicts of interest in allocating the time of our personnel between our properties and the Canadian properties. The Board of Directors is currently evaluating these arrangements. Our portable self-storage business has incurred operating losses. Public Storage Pickup...

  • Page 28
    ... 31, 2002 Number of Storage Net Rentable Square Feet Facilities (a) (in Thousands) California: Northern...Southern...Texas ...Florida ...Illinois ...Georgia ...Colorado ...New Jersey ...Washington...Maryland ...Missouri...Virginia ...New York ...Ohio...Oregon...Tennessee ...North Carolina...South...

  • Page 29
    ... during business hours. On-site operation is the responsibility of property managers who are supervised by district managers. Some storage facilities also include rentable uncovered parking areas for vehicle storage, as well as space for portable storage containers. Leases for storage facilities...

  • Page 30
    ...Salaam, et. al v. Public Storage, Inc. (filed February 2000) (Superior Court- Sacramento County) The plaintiffs in this case are suing the Company on behalf of a purported class of California resident property managers who claim that they were not compensated for all the hours they worked. The named...

  • Page 31
    ...as a loss on sale of real estate investments in the Company's income statement during 2002. PS Insurance Company In November 2002, a shareholder of the Company made a demand on the Board of Directors that challenged the fairness of the Company's acquisition of PS Insurance Company, Ltd. ("PSIC") and...

  • Page 32
    ... 2002 with overall responsibility for the Company's mini-warehouse operations. In July 2002, Mr. Lotz became president of the real estate division with overall responsibility for the Company's acquisition and development activity. John Reyes, age 42, a certified public accountant, joined the Company...

  • Page 33
    ... our first full year of operations. Overall distributions on Common Stock for 2002 amounted to $209.1 million or $1.80 per share. Holders of Common Stock are entitled to receive distributions when and if declared by the Company's Board of Directors out of any funds legally available for that purpose...

  • Page 34
    ...gives the Board of Directors broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of Equity Stock. In April 2001, the Company completed a public offering of 2,210,500 depositary shares each representing...

  • Page 35
    ...to the Company's consolidated financial statements. (2) During the year ended December 31, 2002, the Company adopted a business plan that included the closure of certain nonstrategic containerized storage facilities (the "Closed Facilities."). The historical operations of the Closed Facilities are...

  • Page 36
    ... Accounting Policies Qualification as a REIT - Income Tax Expense: We believe that we have been organized and operated, and we intend to continue to operate, as a qualifying REIT under the Internal Revenue Code and applicable state laws. A qualifying REIT generally does not pay corporate level...

  • Page 37
    ...December 31, 2002 in 1,403 self-storage facilities containing approximately 84.5 million net rentable square feet. All of our facilities are operated under the "Public Storage" brand name, which we believe is the most recognized and established name in the self-storage industry. Located in the major...

  • Page 38
    ... of PS Business Parks, Inc. ("PSB"). Major elements of these strategies are as follows: • We will focus on enhancing the operating performance of our self-storage properties, primarily through increases in revenues achieved through the telephone reservation center and associated marketing efforts...

  • Page 39
    ... primarily from new property additions, and charges relating to the planned closure of several containerized storage facilities. The impact of these items was partially offset by increased earnings generated by the acquisition of additional real estate investments during 2001 and 2002, the earnings...

  • Page 40
    ...Expansion Facilities...Developed Facilities ...Disposed Facility ...Total net operating income before depreciation...Depreciation ...Operating income...Number of self-storage facilities (at end of period): Net rentable square feet (in thousands, at end of period):... (a) Rental income includes late...

  • Page 41
    ...67,009,000 net rentable square feet, representing approximately 81% of the aggregate net rentable square feet of our self-storage portfolio. Revenues and operating expenses with respect to this group of properties are set forth in the above SelfStorage Operations table under the caption, "Consistent...

  • Page 42
    ... base rental income divided by total available net rentable square feet. (d) In place annual rent per occupied square foot represents contractual rents per occupied square foot without reductions for promotional discounts. (e) Posted annual rent per square foot represents the rents charged to new...

  • Page 43
    ... and cost of operations increasing 2.1%. The 3.3% decrease in rental income was primarily the result of lower average occupancy levels which decreased from 88.9% in 2001 to 85.2% in 2002, representing a 4.2% decrease, offset partially by higher realized annual rent per occupied square foot ($10.92...

  • Page 44
    ... end of July 2002, our occupancy levels were 85.8% as compared to 91.3% at the end of July 2001, representing a reduction of 6.0%. Beginning in mid-August 2002 and through the remainder of the year, we reinstated a promotional discount program and advertised on television in selected markets in an...

  • Page 45
    ...to adjust our marketing activities in an effort to increase our occupancy levels and ultimately our rental income. Cost of Operations Cost of operations increased approximately 2.1% in 2002 as compared to 2001. Cost of managing facilities principally includes payroll related to supervisory personnel...

  • Page 46
    ... space requirements, price and location preferences and also informs the customer of other products and services provided by the Company and its subsidiaries. During 2001, we closed our telephone reservation center in Texas and aggregated all the call volume into a single center in California. As...

  • Page 47
    ...operating income ...$ 437,968 Weighted average occupancy: Southern California ...Northern California ...Texas ...Florida...Illinois ...Georgia...All other states ...Total weighted average occupancy...Realized annual rent per occupied square foot: Southern California ...$ Northern California ...Texas...

  • Page 48
    ...acquired on January 16, 2002 from an affiliated development joint venture and 31 properties acquired on January 1, 2002 in connection with business combinations with two affiliated partnerships (see Note 3 to the consolidated financial statements). The 2001 acquisition includes one facility acquired...

  • Page 49
    ...rentable square feet at December 31, 2002 (which includes the expanded space, and 817,000 square feet of industrial space developed for containerized storage activities - see "Containerized Storage" and "Discontinued Operations"). The aggregate construction costs to complete these expansions totaled...

  • Page 50
    ... income...Depreciation...Operating income (loss) ...Self-storage facilities, at end of period: Number of facilities ...Net rentable square feet ...Total development cost ...Combination facilities, at end of period: Number of facilities ...Net rentable square feet ...Total development cost ...17...

  • Page 51
    ..., the newly developed self-storage facilities participated in promotional discounting and advertising activities to enhance occupancy levels. During 2002, the NewlyDeveloped Facilities had a weighted average occupancy level of approximately 51.6%. Property operating expenses are substantially fixed...

  • Page 52
    ... forth the historical commercial property amounts included in the financial statements: Commercial Property Operations (excluding discontinued operations): Year Ended December 31, 2002 2001 Rental income ...Cost of operations...Net operating income...Depreciation expense...Operating income...$11,781...

  • Page 53
    ..., Public Storage Pickup & Delivery ("PSPUD"), a subsidiary of the Company, made its initial entry into the containerized storage business through its acquisition of a single facility operator located in Irvine, California. At December 31, 2001, PSPUD had 55 facilities that had been opened between...

  • Page 54
    ... Closed Facilities. Tenant Reinsurance Operations: On December 31, 2001, we acquired PS Insurance Company, Ltd. ("PS Insurance") from a related party. PS Insurance reinsures policies against losses to goods stored by tenants in our self-storage facilities. Effective January 1, 2002, the operations...

  • Page 55
    ...the earnings of PS Business Parks, Inc., a publicly traded real estate investment trust (American Stock Exchange symbol "PSB") organized by the Company on January 2, 1997. As of December 31, 2002, we owned 5,418,273 common shares and 7,305,355 operating partnership units (units which are convertible...

  • Page 56
    ... product research, development overhead, consulting fees, lease termination costs relating to our PSPUD business and employee severance costs. Such costs totaled approximately $5,630,000 in 2001 and $5,963,000 in 2000. The reduction in general and administrative expense during 2002 was largely due...

  • Page 57
    ... in Note 3 to the Company's consolidated financial statements. Included in minority interest in income for the year ended December 31, 2002 is $721,000 in depreciation expense. (c) These amounts reflect the minority interests represented by the Convertible Partnership Units (see Note 9 to the...

  • Page 58
    ... joint venture partner whose partners include an institutional investor and the Company's Chairman and former CEO, B. Wayne Hughes ("Mr. Hughes"). The Consolidated Development Joint Venture is funded solely with equity capital consisting of 51% from the Company and 49% from the joint venture partner...

  • Page 59
    ... statement. Following are the amounts with respect to the Closed Facilities and the commercial facility sold that are included in Discontinued Operations. Discontinued Operations: Year Ended December 31, 2002 2001 Rental income (a): Containerized storage facilities ...Commercial properties...Total...

  • Page 60
    ... stock. We expect to fund our growth strategies with cash on hand at December 31, 2002, internally generated retained cash flows, and proceeds from issuing equity securities. In general, our current strategy is to continue to finance our growth with permanent capital, either common or preferred...

  • Page 61
    ... enables us to access capital when appropriate. During 2002 and 2001, we completed the following capital raising activities (amounts are presented net of issuance costs): Securities issued 8.60% Cumulative Preferred Stock, Series Q Public issuance of Equity Stock, Series A Direct placement...

  • Page 62
    ...approximately $25,000 per redemption for 2001 and $18,000 per redemption for 2002. We have called for redemption our 9.2% Senior Preferred Stock Series B which will be redeemed on March 31, 2003. The aggregate redemption amount for this security is $25 per share or approximately $57.5 million in the...

  • Page 63
    ... the general partner, for an aggregate acquisition cost of $81.2 million. This partnership owned 13 self-storage facilities. We recently mailed an information statement relating to the April 28, 2003 acquisition by the Company of all of the 52,851 limited partnership units that it did not own in PS...

  • Page 64
    ... 31, 2002. These parcels will either be developed or sold. Stock Repurchase Program: The Company's Board of Directors has authorized the repurchase from time to time of up to 25,000,000 shares of the Company's common stock on the open market or in privately negotiated transactions. During 2001, we...

  • Page 65
    ... series of Senior Preferred Stock will be redeemable at the option of the Company, in whole or in part, at $25 per share (or depositary share in the case of the Series K through Series V), plus accrued and unpaid dividends. Our market risk sensitive instruments include notes payable, which totaled...

  • Page 66
    ... the Company's definitive proxy statement filed in connection with the annual shareholders' meeting to be held on May 8, 2003 (the "Proxy Statement") under the caption " Election of Directors." Information required by this item with respect to executive officers is provided in Item 4A of this report...

  • Page 67
    ... prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the...

  • Page 68
    ... of this report. 2. Financial Statement Schedules The financial statements schedules listed in the accompanying Index to Financial Statements and Schedules are filed as part of this report. 3. Exhibits See Index to Exhibits contained herein. b. Reports on Form 8-K Not applicable. c. Exhibits: See...

  • Page 69
    .... Certificate of Determination for the 8-7/8% Cumulative Preferred Stock, Series G. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8% Cumulative Preferred Stock, Series G and incorporated herein by reference...

  • Page 70
    ... 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8.600% Cumulative Preferred Stock, Series Q and incorporated herein by reference. Amendment to Certificate of Determination for Equity Stock, Series A. Filed with Registrant's Quarterly Report on...

  • Page 71
    ... Report on Form 10-Q for the quarterly period ended September 30, 2002 and incorporated herein by reference. Certificate of Determination for 7.500% Cumulative Preferred Stock, Series V. Filed with Registrant's Form 8-A Registration Statement relating to the Depositary Shares Each Representing...

  • Page 72
    ... Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred Stock, Series J and incorporated herein by reference. Agreement of Limited Partnership of PS Business Parks, L.P. dated as of March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly...

  • Page 73
    ... relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8.75% Cumulative Preferred Stock, Series M and incorporated herein by reference. Limited Partnership Agreement of PSAC Development Partners, L.P. among PS Texas Holdings, Ltd., PS Pennsylvania Trust and PSAC Storage Investors...

  • Page 74
    ..., 2002 among Registrant, Fleet National Bank and the holders of the depositary receipts evidencing the Depositary Shares Each Representing 1/1,000 of a Share of 7.625% Cumulative Preferred Stock, Series T. Filed with Registrant's Form 8-A Registration Statement relating to the Depositary Shares Each...

  • Page 75
    ... Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. * ** Compensatory benefit plan. Management contract. 65

  • Page 76
    ...principal accounting officer) Chairman of the Board Director Director Director Director March 28, 2003 Title Vice-Chairman of the Board, Chief Executive Officer and Director (principal executive officer) President and Director Senior Vice President and Director Vice President and Director Date March...

  • Page 77
    PUBLIC STORAGE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES (Item 15 (a)) Page References Report of Independent Auditors ...Consolidated balance sheets as of December 31, 2002 and 2001...For each of the three years in the period ended December 31, 2002: Consolidated statements of ...

  • Page 78
    REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Public Storage, Inc. We have audited the accompanying consolidated balance sheets of Public Storage, Inc. as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholders' equity, and cash flows...

  • Page 79
    PUBLIC STORAGE, INC. CONSOLIDATED BALANCE SHEETS December 31, 2002 and 2001 (amounts in thousands, except share data) December 31, 2002 ASSETS Cash and cash equivalents...Real estate facilities, at cost: Land ...Buildings...Accumulated depreciation...Construction in process...Land held for ...

  • Page 80
    ... estate entities (including the Company's prorata share of gain on sale of real estate investments in the amount of $3,737,000 in 2002 and $3,210,000 in 2000) ...Minority interest in income: Preferred partnership interests ...Other partnership interests ...Net income before discontinued operations...

  • Page 81
    PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For each of the three years in the period ended December 31, 2002 (Amounts in thousands, except share and per share amounts) Cumulative Preferred Stock $ 1,155,150 Common Stock $ 12,671 50 (351) 12,370 184 (1,058) 11,496 204 (1) 11...

  • Page 82
    ... on line of credit ...Principal payments on notes payable ...Net proceeds from the issuance of Common Stock ...Net proceeds from the issuance of Cumulative Preferred Stock ...Net proceeds from the issuance of Equity Stock, Series A ...Net proceeds from the issuance of preferred partnership units...

  • Page 83
    ...Issuance of Common Stock...In connection with business combinations...To acquire minority interests and real estate...Issuance of Equity Stock, Series A in connection with special distribution to common shareholders and in connection with acquisition of real estate facilities ...2001 2000 $(330,426...

  • Page 84
    ... Public Storage, Inc. (the "Company") is a California corporation, which was organized in 1980. We are a fully integrated, self-administered and self-managed real estate investment trust ("REIT") whose principal business activities include the acquisition, development, ownership and operation...

  • Page 85
    ..., 2002 is $11,423,000 held by STOR-Re Mutual Insurance Company, Inc. ("STOR-Re"), a newly consolidated entity (see Note 3). Insurance and other regulations place significant restrictions on our ability to withdraw these funds for purposes other than insurance activities. Real estate facilities Real...

  • Page 86
    ...equipment, and other such assets associated with the containerized storage operations, system development and computer software costs, assets associated with the truck rental business, accounts receivable, and prepaid expenses. Accounts receivable due from tenants are net of allowances for estimated...

  • Page 87
    ... 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, 2002 totaled $22,911,000. PS Insurance Company, Ltd. reinsures policies against claims for losses to goods stored...

  • Page 88
    ... amortization of property management contracts. In addition, included in depreciation and amortization expense for 2001 is $2,705,000 relating to the amortization of goodwill. Revenue and expense recognition Rental income, which is generally earned pursuant to month-to-month leases for storage space...

  • Page 89
    ... Company and its affiliates. The Company also utilizes other insurance carriers to provide property and liability coverage in excess of STOR-Re's limitations. Prior to July 1, 2002, the insurance premiums paid to STOR-Re were included in property operating expenses. After June 30, 2002, the insured...

  • Page 90
    ... policies against losses to goods stored by tenants in our self-storage facilities and which owned, and continues to own, 301,032 shares of the Company's common stock. Prior to December 31, 2001, PS Insurance Company was owned by our chairman and former chief executive officer, B. Wayne Hughes...

  • Page 91
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 Development Joint Venture 2002 business combinations: Real estate facilities ...Cash ...Other assets ...Accrued and other liabilities Minority interest ...2001 business combinations: Goodwill ...Other assets ......

  • Page 92
    ...amounts represent the historical operations of the Closed Facilities and the commercial property sold. Amounts with respect to these facilities for periods prior to 2002 were previously classified as rental income, cost of operations, and depreciation expense in the financial statements. (b) Amount...

  • Page 93
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 5. Real estate facilities Activity in real estate facilities during 2002, 2001 and 2000 is as follows: 2002 Operating facilities, at cost: Beginning balance ...Property acquisitions: Business combinations (Note 3) ......

  • Page 94
    ... of $3,737,000 and $3,210,000, respectively, representing our share of PSB's gains on sale of real estate and real estate investments; these gains are presented in "Equity in earnings from real estate entities" in our consolidated income statement. During 2002, 2001, and 2000, we invested a total of...

  • Page 95
    ...355 limited partnership units in the operating partnership; these limited partnership units are convertible at our option, subject to certain conditions, on a onefor-one basis into PSB common stock. Based upon PSB's trading price at December 31, 2002 ($31.80), the shares and units had a market value...

  • Page 96
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 For the Year Ended December 31, 2002 2001 (Amount in thousands) For the year ended December 31, Total revenue ...Gain on real estate investments ...Cost of operations and other expenses ...Depreciation and ...

  • Page 97
    ..., 2002 and 2001 consist of the following: 2002 Carrying amount Unsecured senior notes: 7.08% note due November 2003...7.47% note due January 2004 ...7.66% note due January 2007 ...Mortgage notes payable: 10.55% mortgage notes secured by real estate facilities, principal and interest payable monthly...

  • Page 98
    ... interests' share of the operating results of the Company relating to the consolidated operations of the Consolidated Entities. Preferred partnership interests: During 2000, one of our consolidated operating partnerships issued in aggregate $365.0 million of preferred partnership units: March...

  • Page 99
    ... N preferred units are convertible into shares of 9.5% Series N Cumulative Preferred Stock, and the Series O preferred units are convertible into shares of 9.125% Series O Cumulative Preferred Stock of the Company. Other partnership interests: Minority interest at December 31, 2002 and 2001, and...

  • Page 100
    ... allocated to PSAC Storage Investors, net of cumulative distributions. Convertible Partnership Units As of December 31, 2002, one of our Consolidated Entities had approximately 237,935 operating partnership units ("Convertible Units") outstanding, representing a limited partnership interest in the...

  • Page 101
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 Other consolidated partnerships At December 31, 2002, the Other Consolidated Partnerships reflect common equity interests that the Company does not own in 23 entities owning an aggregate of 141 real estate facilities. ...

  • Page 102
    ... of the series of Cumulative Senior Preferred Stock will be redeemable, at the option of the Company, in whole or in part, at $25 per share (or depositary share in the case of the Series K through Series V), plus accrued and unpaid dividends. Common Stock During 2002, 2001 and 2000, we issued and...

  • Page 103
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 (a) Includes 10,000 shares purchased in January 2001 from a corporation wholly-owned by a director of the Company for an aggregate of $251,875 cash. Includes 2,619,893 shares purchased in March 2001 from a limited ...

  • Page 104
    ... STATEMENTS December 31, 2002 2002 Depositary Shares Amount at beginning of year ...Public offerings...Direct placements ...Special dividend ...Issued to related party in connection with the acquisition of real estate facilities ...Amount at end of year ...Issuance Amount 2001 2000 Depositary...

  • Page 105
    ... the market price of our common stock. The shares are not otherwise redeemable or convertible into shares of any other class or series of the Company's capital stock. Other than as required by law, the Equity Stock, Series AAA has no voting rights. Dividends On August 9, 2001, the Board of Directors...

  • Page 106
    ...to the first quarter of 2003 will be equal to 6.75% per annum. 11. Related Party Transactions On December 31, 2001, the Company purchased all of the capital stock of PS Insurance Company from B. Wayne Hughes, who is Chairman, and at the time was chief executive officer of the Company, and members of...

  • Page 107
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 On December 31, 2001, the Company acquired equity interests in the Consolidated Entities from Mr. Hughes for a cash price of $786,770, a price representing the Hughes family's original cost in these equity interests. ...

  • Page 108
    ... options outstanding at December 31, 2002, 2001 and 2000, had exercise prices less than $30. Accounting for stock options 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...

  • Page 109
    PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 Selected information with respect to employee stock options 2002 For the years ended December 31, 2001 2000 Average estimated value per option granted, utilizing the BlackScholes method ...Assumptions used in ...

  • Page 110
    ... of its unconsolidated subsidiaries own commercial space, managed by PSB, within facilities that combines storage and commercial space for rent. The tenant reinsurance segment reflects the operations of PS Insurance Company, which reinsures policies against losses to goods stored by tenants in our...

  • Page 111
    ...'s net income to the Company's consolidated net income: Year Ended December 31, 2002 2001 Reconciliation of Net Income by Segment: Self-storage Self-storage net operating income ...Self-storage depreciation ...Equity in earnings - storage property operations ...Equity in earnings - depreciation...

  • Page 112
    ...and Contingencies Legal proceedings Salaam, et. Al V. Public Storage, Inc. (filed February 2000) The plaintiffs in this case are suing the Company on behalf of a purported class of California resident property managers who claim that they were not compensated for all the hours they worked. The named...

  • Page 113
    ... catastrophic events (i.e., earthquake and wind damage) determined in recent engineering and actuarial studies. PS Insurance Company reinsures policies against claims for losses to goods stored by tenants at our self-storage facilities (see Note 3). PSIC reinsures its risks with third-party...

  • Page 114
    ...as presented in this table differ from the revenue and cost of operations as presented in the Company's quarterly reports due primarily to the impact of discontinued operations accounting with respect to certain containerized storage facilities that were closed in 2002, as described in Note 4. F-37

  • Page 115
    ... Amount At December 31, 2002 Building Total Accumulated Depreciation Mini-warehouses 1/1/81 Newport News / Jefferson Avenue 1/1/81 Virginia Beach / Diamond Springs 8/1/81 San Jose / Snell 10/1/81 Tampa / Lazy Lane 6/1/82 San Jose / Tully 6/1/82 San Carlos / Storage 6/1/82 Mountain View 6/1/82...

  • Page 116
    PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION Adjustments Resulting from Costs the Acquisition Subsequent of Minority to Acquisition Interests 1,066,000 465,000 658,000 353,000 518,000 430,000 333,000 400,000 491,000 667,000 472,000 456,000 ...

  • Page 117
    ... Austin/Lamar Pompano Fort Worth Montgomeryville Cranston Bossier City Simi Valley Hurst Chattanooga Portland Fern Park Fairfield Houston / Westheimer Austin/ S. First Cincinnati/ E. Kemper Cincinnati/ Colerain Florence/ Tanner Lane Laguna Hills Tacoma/ Phillips Rd. Milwaukie/ Mcloughlin Manchester...

  • Page 118
    ...Carey Lane Wichita/ E. Macarthur Joplin/ S. Range Line San Antonio/ Wetmore Rd. San Antonio/ Callaghan San Antonio/ Zarzamora San Antonio/ Hackberry San Antonio/ Fredericksburg Dallas/ S. Westmoreland Dallas/ Alvin St. Fort Worth/ W. Beach St. Fort Worth/ E. Seminary Fort Worth/ Cockrell St. Everett...

  • Page 119
    ... St. Louis/Reavis Fort Worth/East Loop Westlake Village Sacramento/Franklin Blvd. Richland Hills West Valley/So. 3600 Colorado Springs/ Hollow Tree West LA/Purdue Ave. Capital Heights/Central Ave. Pontiac/Dixie Hwy. Portland/Johns Landing Area Laurel/Ft. Meade Rd. Hammond / Calumet Kansas City...

  • Page 120
    ...Houston/Gessner Houston/Richmond-Fairdale Houston/Gulfton Houston/Westpark Jonesboro Houston / South Loop West Houston / Plainfield Road Houston / North Freeway Houston / Old Katy Road Houston / Long Point Austin / Research Blvd. Arleta / Osborne Street Lynnwood / 196th Street N. Auburn / Auburn Way...

  • Page 121
    ... Beach/General Booth Blvd Redwood City/Storage City Of Industry San Jose/Felipe Baldwin Park/Garvey Ave Westminister / W. 80th Costa Mesa / Newport Austin /N. Lamar Jacksonville/Phillips Hwy. Tampa/Nebraska Avenue Calabasas / Ventura Blvd. Carmichael / Fair Oaks Santa Clara / Duane Citrus Heights...

  • Page 122
    .../ Rosswill Rd So. Brunswick/Highway Denver / Federal Blvd Citrus Heights Lakewood / 6th Ave Houston / S Shaver St Upland/S. Euclid Ave. Norcross / Jimmy Carter Seattle / 13th Salt Lake City West Valley City Pinellas Park / 34th St. W New Orleans / S. Carrollton Ave Orange / Main Sunnyvale / Wedell...

  • Page 123
    ... Vegas / N. Lamb Blvd. Birmingham / W. Oxmoor Road Milpitas / Dempsey Road New Orleans/I-10 Beaverton / S.W. Denny Road Irwindale / Central Ave. Suitland / St. Barnabas Rd North Brunswick / How Lane Lombard / 64th Alsip / 27th Huntsville / Old Monrovia Road West Haven / Bull Hill Lane San Francisco...

  • Page 124
    ... Road 84 Carrollton / Marsh Lane Sherman Oaks / Van Nuys Blvd Salt Lake City/West North Temple Knoxville / Chapman Highway Milpitas / Watson Las Vegas / Jones Blvd Venice / Guthrie Apple Valley / Foliage Ave Chula Vista / Main Street Pantego / West Park Roswell / Alpharetta North Bergen / Tonne San...

  • Page 125
    ... Lynnwood / 180th St Kent / Pacific Hwy Kirkland Federal Way/Pacific Tampa / S. Dale Burlingame/Adrian Rd Miami / Cloverleaf Pinole / San Pablo South Gate / Firesto San Jose / Mabury La Puente / Valley Blvd San Jose / Capitol E Milwaukie / 40th Street Portland / N. Lombard Miami / Biscayne Chicago...

  • Page 126
    ... Lane Edgewater Park / Route 130 Beaverton / S.W. 110 Markham / W. 159Th Place Houston / N.W. Freeway Portland / Gantenbein Upper Chichester/Market St. Fort Worth / Hwy 80 Greenfield/ S. 108th Altamonte Springs East Hazel Crest / Halsted Seattle / Delridge Way Elmhurst / Lake Frontage Rd Los Angeles...

  • Page 127
    ... / Hintz Gresham / Division Tucker / Lawrenceville Decatur / Covington Studio City/Ventura Smyrna / Hargrove Road Hayward / Mission Blvd Park City / Belvider New Castle/Dupont Parkway Las Vegas / Rainbow Mountain View / Reng Venice / Cadillac Simi Valley /Los Angeles Spring Valley/Foreman Darien...

  • Page 128
    ... Sacramento/N. 16th Houston/Westheimer San Pablo/San Pablo Bowie/Woodcliff Milwaukee/S. 84th Clinton/Malcolm Road San Gabriel San Francisco, Second St. San Antonio, TX Naples, FL/Old US 41 Lake Worth, FL/S. Military Tr. Brandon, FL/W Brandon Blvd. Encumbrances - Initial Cost Buildings & Land...

  • Page 129
    ... New Haven Chicago/Pulaski Las Vegas/Desert Inn Torrance/Crenshaw Weymouth St. Louis/Barrett Station Road Rockville/Randolph Simi Valley/East Street Houston/Westheimer Naples Boca Raton Venice Las Vegas Bedford Park Los Angeles Silver Spring Newark Brooklyn Encumbrances - Initial Cost Buildings...

  • Page 130
    ...Park/Sherman Way Jacksonville/South Lane Ave. Newport News/Warwick Blvd. Greenbrook/Route 22 Monsey/Route 59 Santa Rosa/Santa Rosa Ave. Fort Worth/Brentwood Glendale/San Fernando Road Houston/Harwin Irvine/Cowan Street Fairfield/Dixie Highway Mesa/Country Club Drive San Francisco/Geary Blvd. Houston...

  • Page 131
    .../Beaver Ruin Road Carmichael/Fair Oaks Portland/Division Street Napa/Industrial Wheatridge/W. 44th Avenue Las Vegas/Charleston Las Vegas/South Arvill Los Angeles/Santa Monica Warren/Schoenherr Rd. Portland/N.E. 71st Avenue Seattle/Pacific Hwy. South Broadview/S. 25th Avenue Winter Springs/W. St. Rte...

  • Page 132
    ... Dallas/Lemmon Ave. Alsip/115th Street Green Acres/Jog Road Pompano Beach/Sample Road Wyndmoor/Ivy Hill W. Palm Beach/Belvedere Renton 174th St. Sacramento/Northgate Phoenix/19th Avenue Bedford Park/Cicero Lake Worth/Lk Worth Arlington/Algonquin Seattle/15th Avenue Southington/Spring Clifton/Broad...

  • Page 133
    ... / Broad River Rd. Livermore / S. Front Road Garland / Plano San Jose / Story Road Aurora / Abilene Antioch / Sunset Drive Rancho Cordova / Sunrise Berlin / Wilbur Cross Whittier / Whittier Blvd. Peabody / Newbury Street Denver / Blake Evansville / Green River Road Burien / First Ave. So. Rancho...

  • Page 134
    ...Carrollton La Habra Lombard Fairfield Seattle Bellevue Citrus Heights San Jose Stanton Garland Westford Dallas Wheat Ridge Berlin Gretna Spring Sacramento Houston/South Dairyashford Naperville Carrollton Waipahu Davis Decatur Jacksonville Chicoppe Alexandria Houston/Veterans Memorial Dr. Los Angeles...

  • Page 135
    ... Parma Davie Allen Park Aurora San Diego/16th Street Sterling Heights East L.A./Boyle Heights Springfield/Alban Station Littleton Sacramento/57th Street Miami Santa Monica / Wilshire Blvd. Marietta /Austell Rd Denver / Leetsdale Baltimore / York Road Bolingbrook Kent / Central Geneva / Roosevelt...

  • Page 136
    ... 20 Washington Dc/So Capital Lynn / Lynnway Pompano Beach Lake Oswego/ N.State Daly City / Mission Odenton / Route 175 Novato / Landing St. Louis / Lindberg Oakland/International Stockton / March Lane Des Plaines / Golf Rd Morton Grove / Wauke Los Angeles / Jefferson Los Angeles / Martin San Leandro...

  • Page 137
    .../Warm Springs Seattle / Stone Way W. Olympia Mercer/Parkside Ave Bridge Water / Main Norwalk / Hoyt Street Lansing Phoenix Tinley Park Houston/De Soto Dr. Houston / East Freeway Austin/Ben White Arlington/E.Pioneer Las Vegas/Tropicana Branford / Summit Place Las Vegas / Charleston So. San Francisco...

  • Page 138
    ... / Mini Drive San Diego/54th & Euclid Miami / 5th Street Silver Spring/Hill Chicago/E. 95th St. Chicago / S. Harlem St. Charles /Highway Chicago/Burr Ridge Rd. Yonkers / Route 9a Silverlake/Glendale Chicago/Harlem Ave Bethesda / Butler Rd Dundalk / Wise Ave St. Louis / Hwy. 141 Island Park / Austin...

  • Page 139
    .../ Market San Jose / Santa San Diego / Morena Brooklyn /Rockaway Ave Revere / Charger St Las Vegas / E. Charles Laurel / Baltimore Ave East La/Figueroa & 4th Oldsmar / Tampa Road Ft. Lauderdale /S.W. Miami / Nw 73rd St New Orleans/St.Charles Brandon / E. Brandon Blvd St. Louis / N. Lindbergh Blvd. St...

  • Page 140
    ... Lake Rd Mauldin / N. Main Street Simpsonville / Grand View Dr Taylors / Wade Hampton Blvd Charleston/Ashley Phosphate N. Charleston / Dorchester Rd N. Charleston / Dorchester Charleston / Sam Rittenberg Blvd Hilton Head / Office Park Rd Columbia / Plumbers Rd Greenville / Pineknoll Rd Hilton Head...

  • Page 141
    ... Ii Miami / Nw 14th Street Tarpon Springs / Highway 19 Ft. Myers / Tamiami Trail South Jacksonville / Ft. Caroline Rd. Orlando / South Semoran Jacksonville / Southside Blvd. Miami / Nw 7th Ave Vero Beach / Us Hwy 1 Ponte Vedra / Palm Valley Rd. Miami Lakes / Nw 153rd St. Deerfield Beach / Sw 10th St...

  • Page 142
    ... Houston / Westheimer West Ft. Worth / Granbury Road Houston / New Castle Dallas / Inwood Road Fort Worth / Loop 820 North Carrollton / Marsh Lane South Dallas / Forest Central Dr Arlington / Cooper St Webster / Highway 3 Augusta / Peach Orchard Rd Martinez / Old Petersburg Rd Jonesboro / Tara Blvd...

  • Page 143
    ... Road Mobile / Moffat Road Mobile / Grelot Road Mobile / Government Blvd New Orleans / Tchoupitoulas Louisville / Breckenridge Lane Louisville Louisville / Poplar Level Chesapeake / Western Branch Centreville / Lee Hwy Sterling / S. Sterling Blvd Manassas / Sudley Road Longmont / Wedgewood Ave Fort...

  • Page 144
    ...Roosevelt Blvd. Miami-Kendall / Sw 84th Street North Miami Beach / 69th St Miami Beach / Dade Blvd Chicago / N. Natchez Ave Chicago / W. Cermak Road Kansas City / State Ave Lenexa / Santa Fe Trail Road Waukesha / Foster Court River Grove / N. 5th Ave. St. Charles / E. Main St. Chicago / West 47th St...

  • Page 145
    ... 7/1/99 7/1/99 7/1/99 7/1/99 7/1/99 7/1/99 7/1/99 Description Jacksonville/University Irving/W. Airport Houston/Highway 6 So. Concord/Arnold Rockville/Gude Drive Bradenton/Cortez Road San Antonio/Nw Loop Anaheim / La Palma Spring Valley/Sweetwater Ft. Myers/Tamiami Littleton/Centennial Newark/Cedar...

  • Page 146
    ...Hermitage/Central Ct Antioch/Cane Ridge Rd Charlotte / Ashley Road Raleigh / Capital Blvd Charlotte / South Blvd. Greensboro/W.Market St. Belmont / O'neill Ave Matthews Poplar, Memphis Dallas / Swiss Ave Oak Park/Greenfield Rd Santa Anna Hanover Park Memphis / N.Germantwn Pkwy Rowland Heights/Walnut...

  • Page 147
    ...Houston/Main St Houston/W. Loop/S. Frwy Chicago Raleigh/Glenwood Frazier Troy/E. Big Beaver Rd Ft Lauderdale No Hollywood/Sherman Way Tuscon/E. Speedway Lombard/Finley Los Angeles/West Pico Long Island Lakewood/Cedar Dr. Farmingdale/Rte 110 Philadelphia/Aramingo Largo/Walsingham Road Port Washington...

  • Page 148
    ... / Sun Sacramento / Howe Sacramento / Capitol Miami / Airport Marietta / Cobb Park Sacramento / Florin Belmont / Dairy Lane So. San Francisco Palmdale / P Street Tucker / Montreal Rd Pasadena / S Fair Oaks Carmichael/Fair Oaks Encumbrances - Initial Cost Buildings & Land Improvements 1,065,000 953...

  • Page 149
    ... / Watson Rd Northglenn /Huron St Skokie / Skokie Blvd Garden City / Stewart Millersville / Veterans W. Babylon / Sunrise Memphis / Summer Ave Santa Clara/Lafayette Naperville / Washington Phoenix/W Union Hills Woodlawn / Whitehead Issaquah / Pickering West La /W Olympic New Orleans/I-10 Pasadena...

  • Page 150
    ... / Goffle Rd Nashua / Southwood Dr Houston/Fm 1960 East Baltimore / Russell Street Weymouth / Main St Clinton / Branch Ave & Schultz La Mirada/Alondra N.Richlnd Hls/Rufe Snow Dr Parkville/E.Joppa Waltham / Lexington St Nashville / Charlotte Mt Juliet / Lebonan Rd Yorktown / George Washington Brea...

  • Page 151
    ...December 31, 2002 Building 3,008,000 Total 5,516,000 Accumulated Depreciation - 2,508,000 Other Properties Glendale/Western Avenue 6/1/98 Renton / Sw 39th St. 6/29/98 Pompano Bch/Center Port Circle 12/9/98 Miami / Nw 115th Ave 12/13/99 Burlingame (Commercial & PUD) 12/30/99 West Palm Beach 12/30...

  • Page 152
    PUBLIC STORAGE, INC. EXHIBIT 11 - EARNINGS PER SHARE For the Year Ended December 31, 2001 2000 1999 (amounts in thousands, except per share data) Earnings Per Share: Net income ...Less: Cumulative Preferred Stock Dividends: 10% Cumulative Preferred Stock, Series A...9.20% Cumulative Preferred Stock,...

  • Page 153
    ... charges ...Income from continuing operations ...Interest expense ...Total Earnings Available to Cover Fixed Charges. Total Fixed Charges - interest expense (a)...Cumulative Preferred Stock dividends...Preferred Partnership Unit distributions...Total Preferred distributions ...Total Combined Fixed...

  • Page 154
    ...Public Storage Institutional Fund...Public Storage Institutional Fund II ...Public Storage Institutional Fund III...Public Storage Institutional Fund IV ...Public Storage Pickup & Delivery, L.P...Stor-RE Mutual Insurance Corporation ...Storage Trust Properties, L.P... State of Formation California...

  • Page 155
    ... the related prospectus of our report dated February 21, 2003 with respect to the consolidated financial statements and schedule of Public Storage, Inc. included in the Annual Report (Form 10-K) for 2002 filed with the Securities and Exchange Commission. ERNST & YOUNG LLP March 28, 2003 Los Angeles...

  • Page 156
    ... of Public Storage, Inc. (the "Company") for the year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), B. Wayne Hughes, as Chief Executive Officer of the Company through November 7, 2002, Ronald L. Havner, Jr., as Chief Executive Officer...

  • Page 157
    ... TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, B. Wayne Hughes, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Public Storage, Inc.; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 158
    ...TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Ronald L. Havner, Jr., certify that: 1. 2. I have reviewed this annual report on Form 10-K of Public Storage, Inc.; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 159
    ... TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Harvey Lenkin, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Public Storage, Inc.; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 160
    ... PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John Reyes, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Public Storage, Inc.; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 161
    ... Directors B. Wayne Hughes (1980) Chairman of the Board Ronald L. Havner, Jr. (2002) Vice-Chairman and Chief Executive Officer Harvey Lenkin (1991) President and Chief Operating Officer Marvin M. Lotz (1999) Senior Vice President - Public Storage, Inc. President - Public Storage Real Estate Division...

  • Page 162
    What does Public Storage mean to America? Business storage Commitment to communities Supports active lifestyles Assists relocation Storage solutions Serves all demographics Family formation Website reservations Public Storage, Inc. 701 Western Avenue • Glendale, California 91201 • (818) 244-...