10-QPeriod: Q1 FY2013

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 8, 2013For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid financial results for the first quarter ended March 31, 2013. The company demonstrated significant revenue growth, driven by strong performance in its property rental segment, which saw a substantial increase of 35.7% year-over-year. This growth was fueled by strategic acquisitions completed in 2012 and early 2013, as well as improvements in occupancy rates and rental rates at stabilized properties. The company also experienced growth in its tenant reinsurance segment, largely due to an expanding property portfolio. While management fees decreased slightly, this was attributed to the impact of acquisitions where EXR bought out joint venture partners. Overall, total revenues increased by a robust 31.1%. Despite higher operating expenses and depreciation related to the expanded property base, EXR managed to significantly boost its operating income and net income, indicating efficient operations and effective property management. The company's financial position remains solid with ample liquidity to fund ongoing operations and future growth initiatives.

Financial Highlights

32 data points
Beta

Net Income

$31.43M

EPS (Diluted)

$0.28

Total Assets

$3.23B

Cash & Equivalents

$35.58M

Free Cash Flow

$51.12M

Financial Statements
Beta
Cost of Revenue$34.44M
Operating Expenses$72.59M
Operating Income$46.73M
Interest Expense$17.37M
Net Income$31.43M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)110.31M
Shares Outstanding (Diluted)114.97M

Key Highlights

  • 1Total revenues increased by 31.1% to $119.3 million for the three months ended March 31, 2013, compared to $91.0 million in the prior year period.
  • 2Property rental revenue grew by 35.7% to $102.9 million, driven by acquisitions and increased occupancy and rental rates.
  • 3Occupancy at stabilized properties improved to 88.5% as of March 31, 2013, up from 85.7% in the prior year.
  • 4Net income attributable to common stockholders rose to $31.4 million ($0.28 per diluted share) from $20.2 million ($0.21 per diluted share) in the same period last year.
  • 5Depreciation and amortization expenses increased by 39.3% to $23.0 million, reflecting the addition of new properties.
  • 6Interest expense decreased by 3.9% to $17.4 million due to a lower weighted average interest rate.
  • 7The company's total debt to market capitalization ratio was 26.0% as of March 31, 2013, indicating a healthy leverage position.

Frequently Asked Questions

The primary driver of revenue growth was the property rental segment, which increased by 35.7% due to 91 property acquisitions completed in 2012 and two acquisitions in early 2013. Additionally, improvements in occupancy rates and rental rates at stabilized properties contributed to this growth.

Acquisitions led to an increase in property operations expenses by 29.5% and a significant rise in depreciation and amortization by 39.3%. These increases are a direct result of integrating new properties into the portfolio.

As of March 31, 2013, Extra Space Storage had $35.6 million in cash and cash equivalents. The company expects to fund its short-term liquidity needs, including operating expenses, dividends, and interest payments, through operating cash flow, existing cash, and borrowings under its credit lines. For longer-term needs like property acquisitions and capital expenditures, they plan to utilize additional secured or unsecured debt, joint ventures, and potential equity or debt offerings.

Interest expense decreased by 3.9% to $17.4 million for the first three months of 2013 compared to the prior year. This reduction is primarily due to a lower combined weighted average interest rate on debt, which decreased from 4.6% to 4.1%.