10-QPeriod: Q3 FY2011

Public Storage Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 7, 2011For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its third-quarter 2011 financial results, highlighting a period of recovery and growth following the economic downturn. The company's core domestic self-storage segment demonstrated resilience, with same-store facilities showing improved occupancy and rental rates, leading to increased net operating income. This improvement is a positive indicator for the self-storage industry's health. While overall net income for the quarter saw a decrease compared to the prior year, largely due to a significant foreign currency exchange loss and charges related to preferred security redemptions, the nine-month period showed a substantial increase in net income and Funds from Operations (FFO). This growth was driven by operational improvements in both same-store and other facilities, as well as favorable foreign currency movements. The company continues to focus on strategic acquisitions and capital management, maintaining a strong balance sheet and access to liquidity, positioning it well for future growth despite ongoing economic uncertainties.

Financial Highlights

31 data points
Beta

Revenue

$445.56M

Net Income

$191.14M

42.9% Net Margin

EPS (Diluted)

$0.69

Total Assets

$9.09B

Cash & Equivalents

$160.73M

Free Cash Flow

$326.33M

Financial Statements
Beta
Revenue$445.56M
Operating Income$199.86M
Interest Expense$5.86M
Net Income$191.14M
EPS (Basic)$0.69
EPS (Diluted)$0.69
Shares Outstanding (Basic)169.73M
Shares Outstanding (Diluted)170.83M

Key Highlights

  • 1Domestic self-storage same-store facilities revenue increased by 5.8% for the quarter and 4.4% for the nine months, driven by improved occupancy and rental rates.
  • 2Net income for the nine months ended September 30, 2011, increased by 20.5% to $397.5 million, or $2.33 per diluted common share, compared to $277.8 million, or $1.64 per diluted common share, in the prior year.
  • 3Funds from Operations (FFO) per diluted common share increased by 23.0% to $4.17 for the nine months ended September 30, 2011, compared to $3.39 in the prior year, indicating strong operational cash flow generation.
  • 4The company acquired nine self-storage facilities for $61.3 million during the nine months ended September 30, 2011, and continues to see acquisition opportunities.
  • 5Shurgard Europe, the company's European segment, showed improved equity in earnings, largely due to the acquisition of joint venture partner interests.
  • 6Public Storage maintained a strong liquidity position with approximately $160.7 million in cash and access to a $300 million line of credit.
  • 7The company successfully redeemed Series K and Series G preferred shares during the quarter, managing its capital structure.

Frequently Asked Questions

The decrease in net income for the quarter was primarily due to a foreign currency exchange loss of $28.3 million in Q3 2011 compared to a gain of $55.5 million in Q3 2010, and $16.2 million in charges related to the redemption of preferred securities (EITF D-42). These were partially offset by improved operational performance in same-store and non-same-store facilities and increased equity in earnings from Shurgard Europe.

The self-storage market showed signs of recovery. Same-store facilities revenue increased by 5.8% for the three months and 4.4% for the nine months ended September 30, 2011, year-over-year. This growth was attributed to a 1.3% increase in weighted average occupancy and a 4.0% increase in realized rent per occupied square foot for the quarter, and similar trends for the nine-month period.

Public Storage's strategy focuses on acquiring, developing, owning, and operating self-storage facilities. They aim to deploy capital effectively through acquisitions, further investment in Shurgard Europe, and potential investments in PS Business Parks. Access to capital is crucial, with plans to use cash on hand, internally generated cash flows, and potentially equity issuances to fund growth and meet obligations. The company also emphasizes maintaining a low debt-to-capitalization ratio and managing its preferred securities strategically.

FFO is a key non-GAAP financial measure used by REITs, including Public Storage, to measure operating performance. It adjusts net income for depreciation and amortization, which are non-cash charges that do not reflect the current market value of real estate. Public Storage presents FFO to provide investors with a better understanding of the company's operational performance and the economic condition of its real estate assets, as it is considered more indicative of REIT performance than traditional net income.