10-QPeriod: Q1 FY2012

Public Storage Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 7, 2012For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its first quarter 2012 results, showcasing continued strength in its core self-storage operations. Revenue from self-storage facilities saw a notable increase, driven by both higher occupancy rates and increased rental rates across its stabilized properties. The company also demonstrated effective cost management, with operating expenses growing at a slower pace than revenues, leading to improved net operating income. Financially, the company maintained a strong liquidity position with substantial cash reserves and an undrawn credit facility. PSA continued its strategic approach to capital structure by issuing new preferred shares and redeeming older, higher-cost series, indicating a focus on optimizing its cost of capital. While foreign currency fluctuations presented a headwind, particularly related to its European operations, the company's overall performance remained robust, supported by its significant market presence and operational efficiency.

Financial Highlights

31 data points
Beta

Revenue

$439.83M

Net Income

$206.72M

47.0% Net Margin

EPS (Diluted)

$0.73

Total Assets

$9.41B

Cash & Equivalents

$620.08M

Free Cash Flow

$279.49M

Financial Statements
Beta
Revenue$439.83M
Operating Income$184.90M
Interest Expense$5.33M
Net Income$206.72M
EPS (Basic)$0.74
EPS (Diluted)$0.73
Shares Outstanding (Basic)170.31M
Shares Outstanding (Diluted)171.41M

Key Highlights

  • 1Total revenues increased by 5.9% to $442.6 million for the three months ended March 31, 2012, compared to $419.7 million for the same period in 2011, primarily driven by self-storage operations.
  • 2Net income allocable to Public Storage shareholders decreased slightly to $205.9 million for the three months ended March 31, 2012, from $206.1 million in the prior year, impacted by a significant foreign currency exchange loss and increased preferred share allocations due to redemptions.
  • 3Funds From Operations (FFO) per diluted common share decreased by 8.8% to $1.35 in Q1 2012 from $1.48 in Q1 2011, mainly due to a decrease in foreign currency exchange gains and an increase in EITF D-42 allocations related to preferred share redemptions.
  • 4The Same Store Facilities portfolio showed a 6.3% increase in Net Operating Income (NOI) and a 4.8% increase in revenues year-over-year, demonstrating the strength of its core, stabilized assets.
  • 5The company issued $923 million of preferred securities in the first quarter of 2012, continuing its strategy of financing growth through preferred equity, while also redeeming several series of preferred shares to lower its cost of capital.
  • 6Cash and cash equivalents increased significantly to $620.1 million at March 31, 2012, up from $139.0 million at December 31, 2011, reflecting strong operating cash flow and capital raising activities.
  • 7The company maintained a relatively low debt-to-total-capitalization ratio, with total debt at $373.0 million representing 4.5% of book equity.

Frequently Asked Questions

The primary driver of revenue growth was the company's self-storage facilities, which contributed over 91% of total revenues. This growth was attributed to a 5.9% increase in rental income, stemming from improved occupancy rates and higher realized rents per occupied square foot in the Same Store Facilities portfolio.

Public Storage strategically managed its capital structure by issuing approximately $923 million of preferred securities and redeeming several series of older, higher-cost preferred shares. This approach aims to optimize the cost of capital and maintain financial flexibility. The company also held a significant cash balance of $620.1 million and had access to a $300 million credit facility.

Foreign currency exchange rates, particularly between the Euro and the U.S. Dollar, had a notable impact. The company recorded a foreign currency exchange gain of $12.2 million in the first quarter of 2012, down from $31.3 million in the same period of 2011. This reduction contributed to the decrease in net income and FFO per share.

The company anticipates continued positive year-over-year growth in rental income for its self-storage operations. Management expects stabilized Same Store Facilities to continue driving performance, with ongoing efforts to manage occupancy and rental rates. Additionally, newly acquired facilities are expected to reach stabilization and contribute to earnings growth.