10-QPeriod: Q2 FY2012

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 8, 2012For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong performance for the second quarter and first half of 2012, driven by significant growth in property rental revenue. Total revenues increased by 21.7% for the quarter and 21.9% for the six-month period compared to the prior year. This growth was fueled by successful property acquisitions completed in late 2011 and early 2012, as well as an increase in occupancy and rental rates at existing stabilized properties. The company's strategic focus on maximizing property performance and expanding its management business continues to yield positive results. Financially, the company demonstrated robust cash flow generation. Net income attributable to common stockholders more than doubled in the second quarter and significantly increased for the six-month period. The company also successfully managed its debt, with a notable decrease in interest expense for the quarter and a strong liquidity position. EXR completed a significant stock offering in April 2012, raising substantial capital to support its growth initiatives and operational needs. The company also saw the full extinguishment of its exchangeable senior notes, simplifying its capital structure.

Financial Highlights

32 data points
Beta

Net Income

$22.41M

EPS (Diluted)

$0.22

Total Assets

$2.71B

Cash & Equivalents

$185.50M

Free Cash Flow

$51.83M

Financial Statements
Beta
Cost of Revenue$26.01M
Operating Expenses$57.08M
Operating Income$37.88M
Interest Expense$15.85M
Net Income$22.41M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)102.11M
Shares Outstanding (Diluted)106.65M

Key Highlights

  • 1Total revenues increased by 21.7% to $94.95 million for the three months ended June 30, 2012, and by 21.9% to $185.94 million for the six months ended June 30, 2012, compared to the prior year periods.
  • 2Property rental revenue grew significantly, up 23.3% for the quarter and 23.3% for the six months, driven by acquisitions and increased occupancy and rental rates at stabilized properties.
  • 3Net income attributable to common stockholders more than doubled to $22.41 million in Q2 2012 compared to $10.61 million in Q2 2011, and increased by 124.6% to $42.63 million for the first six months of 2012.
  • 4The company completed a stock offering in April 2012, issuing 8.05 million shares and raising net proceeds of $226.7 million, enhancing its liquidity and capital resources.
  • 5The $87.66 million in exchangeable senior notes were fully surrendered for exchange and settled in April 2012, simplifying the company's debt structure.
  • 6Same-store net operating income (NOI) increased by a strong 10.2% for the quarter and 10.5% for the six months, indicating healthy performance from its existing portfolio.
  • 7The company maintained a strong liquidity position with $185.5 million in cash and cash equivalents as of June 30, 2012.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in property rental revenue, which rose 23.3% compared to the prior year. This growth was attributed to recent property acquisitions, an increase in occupancy rates at stabilized properties, and higher rental rates for both new and existing tenants. Additionally, management and franchise fees, along with tenant reinsurance revenues, also contributed positively to the top-line growth.

The company demonstrated effective debt management. Interest expense decreased by 2.5% for the quarter due to lower interest rates on new and existing loans. A significant development was the full settlement and extinguishment of its $87.66 million in exchangeable senior notes in April 2012, which simplified its capital structure. The company also bolstered its liquidity through a public stock offering in April 2012, raising over $226 million.

Extra Space Storage's strategy focuses on maximizing property performance through efficient management, strategic acquisitions of self-storage properties, and expanding its management business. The company aims to generate stockholder value by identifying revenue-generating and expense-minimizing opportunities. Their robust performance in this quarter, marked by strong revenue growth, increased occupancy, and higher rental rates, suggests confidence in their ongoing execution of these strategies.

Yes, the company reported a gain of $5.43 million in the second quarter of 2012 from the sale of a self-storage property by a joint venture in which Extra Space Storage held a 40% equity interest. This gain was recognized under 'Equity in earnings of real estate ventures - gain on sale of real estate assets'.