Public Storage 2003 Annual Report Download - page 54

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Net operating income ............. 6,754 7,319 (565) 7,319 8,209 (890)
Depreciation expense .................. 2,535 2,544 (9) 2,544 2,569 (25)
Operating income ................... $4,219 $4,775 $(556) $4,775 $5,640 $(865)
The decrease in rental income in 2003 as compared to 2002 is due primarily to a vacancy in one of the three
stand-alone commercial facilities, which caused a reduction in rental income of approximately $250,000 during
2003 as compared to 2002.
During 2002, we sold one of our commercial facilities to a third party for an aggregate $3.9 million in cash.
The historical operations with respect to this facility are classified as Discontinued Operations in our income
statement and are not included in the above table.
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 22 facilities. In 2003 we closed an additional nine non-strategic facilities.
Collectively the 31 discontinued facilities are referred to as the Closed Facilities. At December 31, 2003, PSPUD
operated 24 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  containerized storage on our income statement. 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,
2003 2002 Change 2002 2001 Change
(Dollar amounts in thousands)
Rental and other income ........................ $33,953 $29,723 $4,230 $29,723 $28,474 $1,249
Cost of operations:
Direct operating costs ....................... 19,239 21,373 (2,134) 21,373 20,888 485
Facility lease expense ....................... 1,679 1,683 (4) 1,683 4,053 (2,370)
Total cost of operations ................. 20,918 23,056 (2,138) 23,056 24,941 (1,885)
Operating income prior to
depreciation.................................. 13,035 6,667 6,368 6,667 3,533 3,134
Depreciation expense (a) ........................ (6,311) (4,547) (1,764) (4,547) (4,392) (155)
Operating income (loss) ......................... $6,724 $2,120 $4,604 $2,120 $(859) $2,979
(a) Depreciation expense principally relates to the depreciation related to the containers, however, depreciation expense for
2003, 2002 and 2001 includes $1,566,000, $1,012,000, and $786,000, respectively, related 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
$33,953,000 in 2003 as compared to $29,723,000 in 2002 as a result of higher per container rents. At December 31,
2003, there were approximately 33,780 occupied containers in the 24 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, property taxes, utilities and
vehicle expenses (fuel and insurance). During 2002, an asset impairment charge was recorded in the amount of
$420,000 with respect to machinery and equipment of the containerized storage facilities because such equipment
was no longer required.