Public Storage 2002 Annual Report Download - page 108

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PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
F-31
2002 2001 2000
Number Average Number Average Number Average
of Price per of Price per of Price per
Options
Share Options Share Options Share
Options outstanding January 1 6,677,334 $24.81 6,412,576 $23.65 3,024,274 $24.08
Granted 792,000 33.20 1,776,500 27.93 3,762,500 23.06
Exercised (948,932) 24.59 (704,901) 22.50 (242,598) 18.99
Canceled (581,178)
26.61 (806,841) 24.51 (131,600) 26.01
Options outstanding December 31 5,939,224 $25.79 6,677,334 $24.81 6,412,576 $23.65
$14.88 $14.88 $14.13
Option price range at December 31 (a) to $37.40 to $34.68 to $33.56
Options exercisable at December 31 3,666,641 $24.46 2,618,889 $24.14 1,680,083 $23.83
Options available for grant at December 31 4,352,690 4,563,512 33,171
(a) Approximately 5,059,000, 6,532,334 and 6,362,575 of 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 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”).
Companies can change their accounting method from the APB 25 Method to the Fair Value Method,
and in doing so can elect between three different methods of transition. The first is the prospective method,
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 the Fair Value Method. The second is the
retroactive restatement method, whereby the company restates all periods presented to reflect compensation cost
utilizing the fair value method for all periods. The third is the modified prospective method, where the
company applies the Fair Value Method from the beginning of the current fiscal year with respect to all options
which vest during the year regardless of when they were granted
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 described above. 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: