10-QPeriod: Q1 FY2014

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 8, 2014For Securities:EXR

Summary

Extra Space Storage Inc. reported strong performance for the first quarter ended March 31, 2014, with total revenues increasing by 27.5% year-over-year to $152.2 million. This growth was driven by a significant 28.3% increase in property rental revenue, largely attributed to strategic acquisitions and improved occupancy and rental rates at stabilized properties. The company also saw growth in tenant reinsurance and management fees. Expenses also rose, up 26.4%, primarily due to increased property operations and depreciation following property acquisitions. Despite higher expenses and increased interest expense resulting from higher debt levels, net income attributable to common stockholders rose by 18.8% to $37.3 million. Funds from Operations (FFO) also showed substantial growth, increasing by 27.5% to $67.8 million, indicating healthy operational performance and cash flow generation. The company's balance sheet reflects continued expansion, with real estate assets growing and a notable increase in borrowings to support its growth strategy.

Financial Highlights

34 data points
Beta

Net Income

$37.34M

EPS (Diluted)

$0.32

Total Assets

$4.12B

Cash & Equivalents

$126.72M

Free Cash Flow

$64.57M

Financial Statements
Beta
Cost of Revenue$43.48M
Operating Expenses$92.19M
Operating Income$60.40M
Interest Expense$19.60M
Net Income$37.34M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)115.44M
Shares Outstanding (Diluted)121.06M

Key Highlights

  • 1Total revenues increased by 27.5% to $152.2 million, driven by property rental revenue growth of 28.3%.
  • 2Net income attributable to common stockholders grew 18.8% to $37.3 million ($0.32 per diluted share).
  • 3Funds from Operations (FFO) increased by 27.5% to $67.8 million, demonstrating strong operating performance.
  • 4The company completed 21 property acquisitions in the first quarter of 2014, contributing significantly to revenue growth.
  • 5Occupancy at wholly-owned stabilized properties increased to 89.5% from 87.7% in the prior year.
  • 6Total debt increased to $2.12 billion, reflecting strategic use of leverage to fund growth and acquisitions.
  • 7The company maintained compliance with all financial covenants on its debt.

Frequently Asked Questions

The primary driver of revenue growth was the significant increase in property rental revenue, which rose by 28.3% to $132.0 million. This growth was fueled by the acquisition of 21 properties during the quarter and the prior year, as well as improvements in occupancy and rental rates at existing stabilized properties.

The company's total debt increased to $2.12 billion as of March 31, 2014, up from $1.58 billion in the prior year. This increase in debt led to higher interest expense, which rose by 12.9% to $19.6 million for the quarter. The company's debt-to-total capitalization ratio was 26.4% at the end of the quarter.

Extra Space Storage is pursuing growth through strategic acquisitions and expects to fund its liquidity needs, including property acquisitions, debt repayment, and dividends, through operating cash flow, existing cash balances, and further borrowings under its credit facilities. The company also indicated it may seek additional term loans and evaluate strategic acquisitions, potentially requiring further capital raises through debt or equity offerings.

Funds from Operations (FFO), a key measure for REITs, increased by 27.5% to $67.8 million for the first quarter of 2014 compared to $53.2 million in the same period of 2013. This indicates a strong improvement in the company's ability to generate cash from its operations.