10-QPeriod: Q3 FY2011

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 7, 2011For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid revenue growth for the nine months ended September 30, 2011, with total revenues increasing by 13.6% to $236.6 million, driven by a 13.4% rise in property rental income. This growth was supported by strategic acquisitions and improved occupancy and rental rates in existing properties. The company also demonstrated effective cost management, with total expenses increasing by 10.2%, a slower pace than revenue growth, leading to a significant increase in income from operations. Financially, EXR is actively managing its capital structure, evidenced by cash flows from financing activities turning positive in the first nine months of 2011, largely due to a successful stock offering. The company's liquidity remains a focus, with substantial debt obligations managed through a combination of operating cash flow, existing cash balances, and planned borrowings. While EXR is expanding its portfolio through acquisitions, it also faces ongoing risks related to economic conditions, competition, and interest rate fluctuations.

Financial Highlights

32 data points
Beta

Net Income

$15.26M

EPS (Diluted)

$0.16

Total Assets

$2.37B

Cash & Equivalents

$33.90M

Free Cash Flow

$35.46M

Financial Statements
Beta
Cost of Revenue$24.27M
Operating Expenses$52.88M
Operating Income$31.21M
Interest Expense$16.76M
Net Income$15.26M
EPS (Basic)$0.16
EPS (Diluted)$0.16
Shares Outstanding (Basic)94.31M
Shares Outstanding (Diluted)98.87M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2011, grew by 13.6% to $236.6 million, driven primarily by a 13.4% increase in property rental revenue.
  • 2Property rental revenue benefited from acquisitions and a 3.4% increase in occupancy and higher rental rates in same-store stabilized properties.
  • 3Net income attributable to common stockholders increased significantly to $34.2 million for the nine months ended September 30, 2011, compared to $17.4 million in the prior year.
  • 4The company raised $112.4 million in net proceeds from a public stock offering in May 2011.
  • 5Total debt as of September 30, 2011, was $1.24 billion, with a debt-to-total capitalization ratio of 40.4%.
  • 6Operating expenses grew at a slower pace than revenues, with property operations and general administrative expenses showing increases due to acquisitions and property management growth.
  • 7The company acquired 27 properties in the first nine months of 2011, significantly expanding its portfolio compared to the same period in 2010.

Frequently Asked Questions

The primary driver of revenue growth is the increase in property rental revenue, which rose by 13.4% for the nine months ended September 30, 2011. This growth is attributed to a combination of property acquisitions, an increase in occupancy rates, and higher rental rates achieved at stabilized properties.

The company has a total debt of $1.24 billion as of September 30, 2011, with a debt-to-total capitalization ratio of 40.4%. They are managing liquidity through operating cash flow, existing cash, and borrowings under credit lines. The company also successfully raised capital through a public stock offering in May 2011. They intend to use cash to repay maturing debt and for general corporate purposes, while also considering additional term loans secured by unencumbered properties.

Acquisitions are a significant contributor to revenue growth, particularly in property rental revenue. They also lead to increased operating expenses (property operations, general and administrative) and depreciation/amortization due to the expansion of the property portfolio. The company acquired 27 properties in the first nine months of 2011.

Key risks include general economic conditions affecting the real estate industry and self-storage markets, competition from existing and new facilities, difficulties in integrating acquisitions, potential uninsured losses, regulatory changes, disruptions in credit markets impacting financing, increased interest rates and operating costs, and the potential failure to maintain REIT status.