Public Storage 2002 Annual Report Download - page 87

PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
F-10
Other assets includes assets utilized in our containerized storage business which totaled $20,275,000
and $30,699,000 at December 31, 2002 and 2001, respectively. The carrying amounts are net of accumulated
depreciation and, in the case of the amount at December 31, 2002, net of asset impairment charges. As
discussed in Note 4, during 2002 an impairment charge of $6,187,000 was recorded with respect to assets used
in the containerized storage operations. In addition, included in cost of operations – containerized storage is an
impairment charge of $750,000 with respect to assets used in the continuing containerized storage operations.
Included in depreciation and amortization expense for 2002, 2001 and 2000 is $5,545,000, $4,422,000,
and $4,257,000 respectively, related to depreciation of other assets. Included in discontinued operations for
2002, 2001, and 2000, respectively, is depreciation expense of $1,322,000 and $1,515,000, and $544,000
respectively, related to depreciation of furniture, fixtures, and equipment of the discontinued operations of the
containerized storage business.
Other assets at December 31, 2002 also includes investments totaling $13,801,000 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, 2002 totaled $22,911,000. 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, 2002 totaled $2,135,000.
These 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 liability 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 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.