10-QPeriod: Q3 FY2009

Public Storage Quarterly Report for Q3 Ended Sep 30, 2009

Summary

Public Storage (PSA) reported its third quarter 2009 results, showing a mixed financial performance influenced by the challenging economic environment. While net income saw a significant year-over-year increase due to favorable foreign currency exchange movements and gains from an equity offering in PS Business Parks, the core self-storage operations experienced declines in revenue and net operating income for both same-store and other facilities. This was primarily driven by lower rental rates and occupancy levels, reflecting broader economic pressures impacting demand. Despite these headwinds, the company maintained a strong liquidity position with substantial cash reserves and an undrawn credit facility, and continued its focus on efficient operations and strategic capital deployment, including opportunistic debt repurchases.

Financial Statements
Beta
Revenue$412.09M
Interest Expense$7.29M
Net Income$237.31M
EPS (Basic)$1.03
EPS (Diluted)$1.03
Shares Outstanding (Basic)168.37M
Shares Outstanding (Diluted)169.04M

Key Highlights

  • 1Net income for Q3 2009 increased significantly year-over-year to $244 million, primarily boosted by a foreign currency exchange gain and a gain from PS Business Parks' equity offering, offsetting a decline in net operating income from self-storage facilities.
  • 2Same-store rental revenues decreased by 4.6% year-over-year, reflecting a 4.2% decline in realized rent per occupied square foot and a 1.0% decrease in average occupancy.
  • 3Net operating income for same-store facilities decreased by 6.3% year-over-year, indicating ongoing pressure on profitability within the core self-storage business.
  • 4The company maintained a strong balance sheet with $670.9 million in cash and cash equivalents and an undrawn $300 million credit facility, providing significant financial flexibility.
  • 5Public Storage repurchased approximately $110 million of its senior unsecured notes and significant portions of its preferred partnership units and preferred shares during the nine months ended September 30, 2009, at a discount, which is expected to reduce future dividend requirements.
  • 6The company's European operations (Shurgard Europe), reported as equity in earnings, also showed mixed results with revenue declines, though improved slightly in the third quarter.
  • 7The company continued to manage operating expenses effectively, with total cost of operations for same-store facilities decreasing by 0.6% year-over-year, demonstrating cost control measures.

Frequently Asked Questions

The substantial year-over-year increase in net income was primarily driven by a favorable foreign currency exchange gain of $21.4 million in Q3 2009, compared to a loss in the prior year's period, and a gain of $30.3 million from PS Business Parks' equity offering. These factors more than offset the decline in net operating income from the core self-storage business.

The challenging economic conditions, including increased unemployment and reduced consumer spending, negatively impacted demand for self-storage. This resulted in lower rental rates and occupancy levels, leading to a 4.6% decrease in rental revenues for same-store facilities and a 6.3% decrease in net operating income for these facilities compared to the prior year's quarter.

Public Storage maintained a strong liquidity position, with $670.9 million in cash and cash equivalents at the end of the quarter. Additionally, the company had an undrawn $300 million revolving credit facility, providing substantial financial flexibility to manage its operations and pursue strategic opportunities.

During the first nine months of 2009, Public Storage actively managed its capital structure by repurchasing approximately $110 million of its senior unsecured notes and significantly repurchasing its preferred partnership units and preferred shares at discounts to their carrying values. These actions are expected to reduce future interest and dividend expenses and demonstrate a proactive approach to capital management.