Public Storage 2013 Annual Report Download - page 26

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16
to a 100% penalty tax on the excess payments, and 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 due to existing laws or changes thereto, 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 customers 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. Our or our customers’ confidential information
could be compromised or misappropriated, due to a breach of our network security. Such data security
breaches as well as system disruptions and shutdowns could 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 revenues 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, 2013, the Hughes Family had ownership interests in, and operated, 54 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 customers in the
Canadian Self-Storage Facilities. During the years ended December 31, 2013, 2012 and 2011, we received
$0.5 million, $0.6 million and $0.6 million, respectively, 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.