Public Storage 2002 Annual Report Download - page 56

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The “Other Investments” includes our equity in earnings with respect to our pro-rata share of earnings with
respect to seven limited partnerships, for which we held an approximately consistent level of equity interest during
the three years ended December 31, 2002. These limited partnerships were formed by the Company during the
1980’s. The Company is the general partner in each limited partnership, and manages each of these facilities for a
management fee that is included in “interest and other income.” The limited partners consist of numerous individual
investors, including the Company, which throughout the 1990’s acquired units of limited partnership interests in
these limited partnerships in various transactions.
Our future earnings with respect to the “Other investments” will be dependent upon the operating results of
the 36 self-storage facilities that these entities own. The operating characteristics of these facilities are similar to
those of the Company’s self-storage facilities, and are subject to the same operational issues as the Consistent Group
of self-storage facilities as discussed above with respect to Self-Storage Operations. See Note 6 to the consolidated
financial statements for the operating results of these entities for the years ended December 31, 2002 and 2001..
Other Income and Expense Items
Interest and other income: Interest in other income includes (i) the net operating results from our third
party property management operations, (ii) the net operating results from our merchandise sales and consumer truck
rentals and (iii) interest income.
Interest and other income has decreased in 2002 as compared to 2001 principally as a result of lower cash
balances invested in interest bearing accounts, lower interest rates, and the reduction in income generated from
affiliated entities that were acquired by the Company. Interest and other income has increased in 2001 as compared
to 2000 principally as a result of higher average cash balances invested in interest bearing accounts and the
aforementioned nonrecurring other income recorded in 2001. The changes in average cash balances are primarily
due to the timing of investing proceeds from the issuance of equity securities into real estate assets.
Depreciation and amortization: Depreciation and amortization expense was $179,634,000 in 2002,
$166,178,000 in 2001 and $148,195,000 in 2000. Included in depreciation expense with respect to our real estate
facilities was $167,485,000 in 2002, $152,447,000 in 2001 and $134,629,000 in 2000; the increases are due to the
acquisition and development of additional real estate facilities in 1999 through 2001. Depreciation expense with
respect to other assets, primarily depreciation of equipment and containers associated with the containerized storage
operations, was $5,545,000 in 2002, $4,422,000 in 2001 and $4,257,000 in 2000. Amortization expense with respect
to intangible assets totaled $6,604,000 for the year ended December 31, 2002 and $9,309,000 for the years ended
December 31, 2001 and 2000, respectively.
Depreciation and amortization during 2002 with respect to real estate facilities acquired or developed
during 2002 amounted to $11,540,000 which was for a partial period for the time they were acquired until December
31, 2002, and we expect the annual depreciation expense with respect to these facilities for 2003 and forward will
approximate $14,398,000.
General and administrative expense: General and administrative expense was $15,619,000 in 2002,
$21,038,000 in 2001 and $21,306,000 in 2000. General and administrative costs for each year principally consist of
state income taxes, investor relation expenses, and corporate and executive salaries. In addition, general and
administrative expense includes expenses that vary depending upon the Company’s activity levels in certain areas,
such as overhead associated with the acquisition and development of real estate facilities, employee severance, and
product research and development expenditures.
During 2001 and 2000, we incurred higher levels of expenditures for 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 to the reduction in these types of expenditures.