Public Storage 2002 Annual Report Download - page 53

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Containerized Storage Operations: In August 1996, 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 1996 and 2001 either through development or leasing of facilities. During 2002, we reevaluated
our operational strategy and closed, or are in the process of closing, 22 facilities (the “Closed Facilities”). At
December 31, 2002, PSPUD operated 33 facilities in 11 states, which are located in major markets in which we
have significant market presence with respect to our traditional self-storage facilities. The operations with respect to
the Closed Facilities, including historical operating results for previous periods, are not included in the table below
and instead are included in Discontinued Operations. PSPUD’s operations, which exclude the Closed Facilities, are
reflected on the table below:
Containerized storage
(excluding discontinued operations):
Year Ended December 31, Year Ended December 31,
2002 2001 Change 2001 2000 Change
(Dollar amounts in thousand)
Rental and other income ........................ $37,776 $34,212 $3,564 $34,212 $32,091 $2,121
Cost of operations:
Direct operating costs (a).................. 28,153 24,899 3,254 24,899 23,336 1,563
Facility lease expense ....................... 2,534 5,017 (2,483) 5,017 7,766 (2,749)
Total cost of operations ................. 30,687 29,916 771 29,916 31,102 (1,186)
Operating income prior to
depreciation.................................. 7,089 4,296 2,793 4,296 989 3,307
Depreciation expense (b)........................ (5,675) (5,133) (542) (5,133) (4,594) (539)
Operating income (loss) ......................... $1,414 $(837) $2,251 $(837) $(3,605) $2,768
(a) Includes an asset impairment charge recorded in the amount of $750,000 in 2002, with respect to machinery and
equipment of the containerized storage facilities that remain open, because such equipment is no longer required based
upon our current operating plan. The amounts for 2001 and 2000, include container obsolescence charges in the
amount of $555,000 and $1,226,000, respectively.
(b) Depreciation expense principally relates to the depreciation related to the containers, however, depreciation expense for
2002, 2001 and 2000 includes $1,098,000, $711,000, and $337,000, respectively, with respect to real estate facilities.
Rental and other income includes monthly rental charges to customers for storage of the containers and
service fees charged for pickup and delivery of containers to customers’ homes. Rental income increased to
$37,776,000 in 2002 as compared to $34,212,000 in 2000 as a result of higher per container rents and an increase in
the number of occupied containers. At December 31, 2002, there were approximately 63,582 occupied containers in
the 33 facilities that are reflected in “ongoing” operations. We continue to evaluate the business operations and
additional facilities may be closed.
Direct operating costs principally includes payroll, equipment lease expense, utilities and vehicle expenses
(fuel and insurance). During 2002, an asset impairment charge was recorded in the amount of $750,000 with respect
to machinery and equipment of the containerized storage facilities that remain open because such equipment is no
longer required based upon our current operating plan.
Over the past three years, facility lease expense has continued to decrease ($ 2,534,000 in 2002, $5,017,000
in 2001 and $7,766,000 in 2000). The reduction over the past three years is principally the result of moving the
operations from leased facilities to wholly-owned facilities, and thus eliminating the lease expense paid to third
parties.
At December 31, 2002, nine of the 33 containerized storage facilities are leased from third parties. The
remaining 24 facilities were operated in facilities owned by the Company, comprised of 19 combination facilities
with an aggregate of 994,000 square feet of industrial space (this square footage is a component of the total net
rentable square footage of the Expansion Facilities and the Developed Facilities in the table above) and five
industrial facilities having an aggregate of 420,000 net rentable square feet.