10-QPeriod: Q3 FY2009

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 5, 2009For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its third-quarter 2009 financial results, showing resilience amidst challenging economic conditions. Total revenues increased by 2.1% year-over-year to $71.3 million, driven by a significant 29.9% surge in tenant reinsurance income and a modest 0.6% rise in property rental revenue. This growth was achieved despite a slight decrease in same-store occupancy and rental rates, indicating effective management of rental income and a growing contribution from ancillary services. The company's operational expenses also saw an increase, largely due to property acquisitions, consolidations, and the wind-down of its development program which resulted in significant impairment charges and severance costs. Notably, net income attributable to common stockholders for the three months ended September 30, 2009, was $6.0 million, down from $9.9 million in the prior year, reflecting these one-time charges and increased interest expense. However, Funds From Operations (FFO) remained robust, indicating the underlying operational strength of the core self-storage business.

Financial Highlights

23 data points
Beta

Net Income

$5.97M

EPS (Diluted)

$0.07

Cash & Equivalents

$100.99M

Free Cash Flow

$16.96M

Financial Statements
Beta
Cost of Revenue$23.02M
Operating Expenses$47.90M
Operating Income$23.22M
Interest Expense$17.70M
Net Income$5.97M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)86.44M
Shares Outstanding (Diluted)91.55M

Key Highlights

  • 1Total revenues increased by 2.1% to $71.3 million for the third quarter of 2009, compared to the same period in 2008, driven by growth in tenant reinsurance and property rentals.
  • 2Tenant reinsurance revenue saw a substantial increase of 29.9% due to higher customer participation rates.
  • 3The company continued to manage its expenses, with property operations and general & administrative expenses showing controlled increases, while tenant reinsurance expenses decreased.
  • 4Significant impairment charges and severance costs were recognized in relation to the wind-down of the development program, impacting net income.
  • 5Despite a decline in same-store occupancy and rental rates, overall property rental revenue saw a slight increase, showcasing effective revenue management.
  • 6Interest expense increased due to higher debt levels and changes in interest rate swap arrangements.
  • 7The company maintained strong liquidity with $100.9 million in cash and cash equivalents as of September 30, 2009.

Frequently Asked Questions

Total revenues increased by 2.1% to $71.3 million for the three months ended September 30, 2009, compared to $69.8 million for the same period in 2008. This growth was primarily driven by a significant increase in tenant reinsurance revenue (up 29.9%) and a modest increase in property rental revenue (up 0.6%).

The wind-down of the development program led to significant one-time charges. The company incurred $18.88 million in impairment charges for undeveloped land and development projects, and $1.4 million in severance costs. These charges, reported under 'Unrecovered development and acquisition costs' and 'Severance costs associated with wind-down of development program,' negatively impacted net income but are not reflective of the ongoing operational performance of the core self-storage business.

Extra Space Storage maintained a healthy liquidity position with $100.99 million in cash and cash equivalents as of September 30, 2009. This provided the company with resources for general corporate purposes and to manage upcoming debt maturities.

The company had $1.36 billion in total debt as of September 30, 2009. Interest expense increased primarily due to higher overall debt levels and the expiration of an interest rate swap that had previously capped interest costs on a portion of its variable-rate debt. The company utilized credit lines and new notes payable to manage its financing needs. A significant gain was also realized from the repurchase of exchangeable senior notes.