10-QPeriod: Q3 FY2010

Public Storage Quarterly Report for Q3 Ended Sep 29, 2010

Filed November 8, 2010For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its third-quarter and nine-month results for the period ending September 28, 2010. While the overall financial results for the nine-month period showed a decrease in net income compared to the prior year, primarily due to foreign currency fluctuations and adjustments related to redeemed securities, the company demonstrated a return to revenue growth in its core self-storage business. For the three months ended September 30, 2010, net income increased year-over-year, driven by improved operations in Same Store Facilities and a significant foreign currency exchange gain. The company has also been actively pursuing strategic acquisitions, having acquired 38 self-storage facilities in the first nine months of 2010. Management expressed optimism about potential future acquisition opportunities, noting an increase in facilities coming to market. The company's liquidity remains strong, with substantial cash reserves and access to a credit line, positioning it to fund operations and strategic initiatives.

Financial Highlights

31 data points
Beta

Revenue

$422.30M

Net Income

$239.35M

56.7% Net Margin

EPS (Diluted)

$1.07

Total Assets

$9.65B

Cash & Equivalents

$513.48M

Free Cash Flow

$296.10M

Financial Statements
Beta
Revenue$422.30M
Interest Expense$7.84M
Net Income$239.35M
EPS (Basic)$1.08
EPS (Diluted)$1.07
Shares Outstanding (Basic)169.01M
Shares Outstanding (Diluted)169.98M

Key Highlights

  • 1Same Store Facilities revenue showed a modest increase of 1.2% for the three months ended September 30, 2010, after experiencing year-over-year declines throughout 2009, indicating a positive turn in operational performance.
  • 2The company acquired 38 self-storage facilities for $225.4 million during the first nine months of 2010, primarily in Southern California, and is actively seeking further acquisition opportunities.
  • 3Net income for the three months ended September 30, 2010, increased to $182.2 million ($1.07 per diluted share) from $173.5 million ($1.03 per diluted share) in the prior year, boosted by operational improvements and a significant foreign currency exchange gain.
  • 4Despite a decrease in net income for the nine months ended September 30, 2010, compared to the prior year ($277.8 million vs. $468.5 million), this was largely attributed to non-operational factors like foreign currency translation losses and specific accounting adjustments related to security redemptions.
  • 5Public Storage maintains a strong liquidity position with $513.5 million in cash and $102.1 million in short-term investments at September 30, 2010, alongside a $300 million credit line.
  • 6The company successfully raised $121.2 million in net proceeds from the issuance of Series P Cumulative Preferred Shares in October 2010, demonstrating access to capital markets.
  • 7Operating expenses for Same Store Facilities increased by 3.2% for the quarter and 1.5% for the nine months, driven mainly by higher property taxes, payroll, and repairs and maintenance, though media advertising costs decreased.

Frequently Asked Questions

For the three months ended September 30, 2010, same-store revenue increased by 1.2% year-over-year, which is a positive sign after experiencing declines throughout 2009. This improvement is attributed to higher occupancy levels, though offset by slightly lower realized rental rates per occupied square foot.

The company acquired 38 facilities for $225.4 million in the first nine months of 2010. These acquisitions, along with ongoing capital needs, are being funded through a combination of existing cash balances, internally generated cash flow, proceeds from equity issuances (like the Series P Preferred Shares), and potentially assumption of existing debt.

The decrease in net income for the nine months ended September 30, 2010, compared to the same period in 2009 was primarily due to significant factors outside of core operations. These included a foreign currency exchange loss of $28.6 million (compared to a gain in the prior year) and accounting adjustments related to the redemption of securities (EITF D-42), which reduced income allocated to common shareholders by $31.1 million relative to the prior year, as well as a gain on disposition of real estate investments in the prior year that did not recur.

Management believes there are opportunities to acquire additional facilities in 2010 and 2011 due to an increase in facilities coming to market and higher transaction volumes. They are currently under contract to acquire four additional facilities. While they are less focused on development and redevelopment in the short term, they are exploring strategic acquisitions.