Public Storage 2012 Annual Report Download - page 33

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ongoing intercompany arrangements could have to change, resulting in higher ongoing tax payments. To the extent
the Company is required to pay federal, foreign, state or local taxes or federal penalty taxes, we will have less cash
available for distribution to shareholders.
We are heavily dependent on computer systems, telecommunications and the Internet to process transactions,
summarize results and manage our business and security breaches or a failure of such networks, systems or
technology could adversely impact our business and customer relationships.
We are heavily dependent upon automated information technology and Internet commerce, with
approximately half of our new tenants coming from the telephone or over the Internet, and the nature of our business
involves the receipt and retention of personal information about our customers. We centrally manage significant
components of our operations with our computer systems, including our financial information, and we also rely
extensively on third-party vendors to retain data, process transactions and provide other systems services. These
systems are subject to damage or interruption from power outages, computer and telecommunications failures,
computer worms, viruses and other destructive or disruptive security breaches and catastrophic events.
As a result, our operations could be severely impacted by a natural disaster, terrorist attack or other
circumstance that resulted in a significant outage at our systems or those of our third party providers, despite our use
of back up and redundancy measures. Further, viruses and other related risks could negatively impact our
information technology processes. We could also be subject to a “cyber-attack” or other data security breach which
would penetrate our network security, resulting in misappropriation of our confidential information, including
customer personal information. System disruptions and shutdowns could also result in additional costs to repair or
replace such networks or information systems and possible legal liability, including government enforcement actions
and private litigation. In addition, our customers could lose confidence in our ability to protect their personal
information, which could cause them to discontinue leasing our self-storage facilities. Such events could lead to lost
future sales and adversely affect our results of operations.
We have no ownership interest in Canadian self-storage facilities owned or operated by the Hughes Family.
At December 31, 2012, the Hughes Family had ownership interests in, and operated, 53 self-storage
facilities in Canada (the “Canadian Self-Storage Facilities”). These facilities are operated under the “Public
Storage” tradename, which we license to the Hughes Family for use in Canada on a royalty-free, non-exclusive
basis. We have a right of first refusal, subject to limitations, to acquire the stock or assets of the corporation
engaged in the operation of the Canadian Self-Storage Facilities if the Hughes Family or the corporation agrees to
sell them. However, we do not benefit from profits or potential appreciation in value of the Canadian Self-Storage
Facilities because we have no ownership interest in these facilities. We do not operate in the Canadian self-storage
market, and have no plans to do so. However, if we choose to do so without acquiring the Hughes Family interests
in the Canadian Self-Storage Facilities, we may have to share the use of the “Public Storage” name in Canada with
the Hughes Family, unless we are able to terminate the license agreement.
Through our subsidiaries, we reinsure risks relating to loss of goods stored by tenants in the Canadian Self-
Storage Facilities. During each of the three years ended December 31, 2012, we received $0.6 million in
reinsurance premiums attributable to the Canadian Self-Storage Facilities. Because our right to earn these premiums
may be qualified, there is no assurance that these premiums will continue.
We are subject to laws and governmental regulations and actions that require us to incur compliance costs
affecting our operating results and financial condition.
Our business is subject to regulation under a wide variety of U.S. federal, state and local laws, regulations
and policies including those imposed by the SEC, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street
Reform and Consumer Protection Act and New York Stock Exchange, as well as applicable labor laws. Although
we have policies and procedures designed to comply with applicable laws and regulations, failure to comply with
the various laws and regulations may result in civil and criminal liability, fines and penalties, increased costs of
compliance, restatement of our financial statements and could also affect the marketability of our real estate
facilities.