Public Storage 2003 Annual Report Download - page 91

PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-12
of our preferred stock was equivalent to the liquidation preference as recorded on our balance sheet. Each of
the series of preferred stock that was called for redemption was redeemed at the liquidation preference.
Accordingly, based upon our interpretation, the fair value of the consideration given at redemption was
equivalent to the carrying amount on our balance sheet, resulting in no impact to net earnings available to
common stockholders in the calculation of earnings per share.
At the July 31, 2003 meeting of the EITF, the Securities and Exchange Commission Observer clarified
that for the purposes of applying EITF Topic D-42, the carrying amount of the preferred stock should be
reduced by the issuance costs of the preferred stock, regardless of where in the stockholders' equity section
those costs were initially classified on issuance. We therefore revised our accounting treatment in 2003 to
conform to the SEC Observers clarification, and have reflected adjustments to amounts previously reported in
2001 and 2002 to conform such presentations to the SEC Observers clarification.
As a result of this implementation, we allocated an additional $7,120,000 ($0.06 per diluted share) for
the year ended December 31, 2003 for the excess of the redemption amount over the carrying amount of our
Cumulative Preferred Stock. In addition, the 2002 and 2001 allocations of net income and earnings per share
have been restated to reflect the allocation of $6,888,000 ($0.06 per diluted share) and $14,835,000 ($0.12 per
diluted share), respectively, for such excess with respect to redemptions of our Cumulative Preferred Stock. It
is our policy to record such allocation at the time the securities are called for redemption. This implementation
had no impact upon our reported net income; however, the implementation did result in a reallocation of such
net income between our preferred and common shareholders.
Net income allocated to our common shareholders has been further allocated among our two classes of
common stock; our regular common stock and our Equity Stock, Series A. The allocation among each class
was based upon the two-class method. Under the two-class method, earnings per share for each class of
common stock is determined according to dividends declared (or accumulated) and participation rights in
undistributed earnings. Under the two-class method, the Equity Stock, Series A for the years ended December
31, 2003, 2002 and 2001 were allocated approximately $21,501,000, $21,501,000 and $19,455,000,
respectively, of net income. The remaining $161,836,000, $141,423,000, and $171,939,000, for the years
ended December 31, 2003, 2002, and 2001, respectively, was allocated to our common stock.
Basic net income per share is computed using the weighted average common shares outstanding (prior
to the dilutive impact of stock options and restricted stock outstanding). Diluted net income per common share
is computed using the weighted average common shares outstanding (adjusted for the dilutive impact of stock
options and restricted stock outstanding that totaled 1,336,000 in 2003, 1,566,000 in 2002 and 1,267,000 shares
in 2001).
Commencing January 1, 2000, the 7,000,000 Class B common shares outstanding began to participate
in distributions of the Companys earnings. Distributions per share of Class B common stock are equal to 97%
of the per share distribution paid to the regular common shares. As a result of this participation in the
distribution of our earnings, we have included 6,790,000 (7,000,000 x 97%) Class B common shares in the
weighted average common equivalent shares for the year ended December 31, 2001.
As of March 31, 2002, the remaining contingency for the conversion of the Class B common stock into
regular common stock was satisfied. As a result, beginning April 1, 2002, we began to include all 7,000,000
Class B common shares in the computation of the weighted average common equivalent shares. The Class B
common stock converted into 7,000,000 shares of common stock on January 1, 2003.