Public Storage 2003 Annual Report Download - page 39

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December 31, 2003. Future events, or facts and circumstances that currently exist that we have not yet identified,
could cause us to conclude in the future that other long-lived assets are impaired. Any resulting impairment charge
could have a material adverse impact on our financial condition and results of operations.
Estimated Useful Lives of Long-Lived Assets: Substantially all of our assets consist of depreciable, long-
lived assets. We record depreciation expense with respect to these assets based upon their estimated useful lives.
Any change in the estimated useful lives of those assets, caused by functional or economic obsolescence or other
factors, could have a material adverse impact on our financial condition or results of operations.
Estimated Level of Retained Risk Liabilities: As described in Notes 2 and 16 to the consolidated financial
statements, we retain certain risks with respect to property perils, legal liability, and other such risks. In connection
with our retention of these risks, we accrue losses based upon our estimated level of losses incurred using certain
actuarial assumptions followed in the insurance industry and based upon our experience. While we believe that the
amounts of the accrued losses are adequate, the ultimate liability may be in excess of or less than the amounts
provided.
Accruals for Contingencies: We are exposed to business and legal liability risks with respect to events that
have occurred, but in accordance with accounting principles generally accepted in the United States, we have not
accrued for such potential liabilities because the loss is either not probable or not estimable or because we are not
aware of the event. Future events and the result of pending litigation could result in such potential losses becoming
probable and estimable, which could have a material adverse impact on our financial condition or results of
operations. Some of these potential losses, which we are aware of, are described in Note 16 to the consolidated
financial statements.
Accruals for Operating Expenses: We accrue for property tax expense and other operating expenses based
upon estimates and historical trends and current and anticipated local and state government rules and regulations. If
these estimates and assumptions are incorrect, our expenses could be misstated.
Overview
The self-storage industry is highly fragmented and is composed predominantly of numerous local and
regional operators. Competition in the markets in which we operate is significant and has increased over the past
several years due to additional development of self-storage facilities. We believe that the increase in competition has
had a negative impact to our occupancy levels and rental rates in many markets. However, we believe that we
possess several distinguishing characteristics that enable us to compete effectively with other owners and operators.
We are the largest owner and operator of self-storage facilities in the United States with direct and indirect
ownership interests as of December 31, 2003 in 1,410 self-storage facilities containing approximately 85.2 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 metropolitan markets
of 37 states, our self-storage facilities are geographically diverse, giving us national recognition and prominence.
This concentration establishes us as one of the dominant providers of storage space in most markets in which we
operate and enables us to use a variety of promotional activities, such as television advertising as well as targeted
discounting and referrals, which are generally not economically viable to most of our competitors. In addition, we
believe that the geographic diversity of the portfolio reduces the impact from regional economic downturns and
provides a greater degree of revenue stability.
We will continue to focus our growth strategies on: (i) improving the operating performance of our existing
self-storage properties, (ii) increasing our ownership of self-storage facilities through development and acquisitions,
(iii) improving the operating performance of our containerized storage business, and (iv) participating in the growth
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