10-QPeriod: Q2 FY2017

Public Storage Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 31, 2017For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its financial results for the quarter and six months ended June 30, 2017. For the quarter, net income attributable to common shareholders decreased slightly to $276.7 million ($1.59 per diluted share) from $280.8 million ($1.61 per diluted share) in the prior year period, primarily due to increased foreign exchange losses on Euro-denominated debt. However, for the six-month period, net income attributable to common shareholders increased to $557.8 million ($3.20 per diluted share) from $522.1 million ($3.00 per diluted share) in the prior year, driven by higher self-storage net operating income and increased equity in earnings from unconsolidated real estate entities. The company's core self-storage operations demonstrated resilience, with same-store revenues increasing by 3.3% for the quarter and 3.7% for the six months, driven by higher realized rental income per occupied square foot. While occupancy slightly decreased year-over-year, management attributed this to market softness and increased competition in some areas. The company continued to invest in growth, with ongoing development projects and strategic acquisitions, though short-term dilution from these activities was noted. PSA maintained a strong liquidity position with significant cash reserves and available borrowing capacity.

Financial Highlights

35 data points
Beta

Revenue

$664.31M

72.5% Gross Margin

Net Income

$355.21M

53.5% Net Margin

EPS (Diluted)

$1.59

Total Assets

$10.37B

Cash & Equivalents

$358.27M

Free Cash Flow

$506.24M

Financial Statements
Beta
Revenue$664.31M
Cost of Revenue$182.58M
Gross Profit$481.73M
Operating Expenses$307.75M
Operating Income$356.56M
Interest Expense$1.12M
Net Income$355.21M
EPS (Basic)$1.59
EPS (Diluted)$1.59
Shares Outstanding (Basic)173.60M
Shares Outstanding (Diluted)174.07M

Key Highlights

  • 1Net income attributable to common shareholders for the six months ended June 30, 2017, increased by $35.7 million to $557.8 million, or $3.20 per diluted share, compared to $522.1 million, or $3.00 per diluted share, in the prior year.
  • 2Self-storage revenues from same-store facilities increased by 3.3% for the quarter and 3.7% for the six months, primarily due to higher realized annual rent per occupied square foot.
  • 3The company's core self-storage operations continue to perform well, with Net Operating Income (NOI) from same-store facilities increasing by 2.6% for the quarter and 3.3% for the six months.
  • 4Equity in earnings from unconsolidated real estate entities (PSB and Shurgard Europe) increased significantly, by $9.8 million for the quarter and $15.6 million for the six months, reflecting improved performance of these investments.
  • 5Foreign currency exchange losses, primarily related to Euro-denominated debt, negatively impacted quarterly results by $25.4 million, but this was partially offset by improvements in operating segments.
  • 6Public Storage maintained a strong liquidity position with $358.3 million in cash and cash equivalents and $484.6 million in available borrowing capacity on its revolving credit facility as of June 30, 2017.
  • 7The company continues to invest in growth through development and acquisitions, with approximately $658.6 million in ongoing development projects and several acquisitions completed or under contract.

Frequently Asked Questions

For the quarter ended June 30, 2017, total revenues increased to $664.3 million from $634.2 million in the same period of 2016, a rise of approximately 4.8%. This growth was primarily driven by a 5.0% increase in self-storage facility revenues.

Foreign currency exchange rates had a negative impact, particularly on the quarterly results. For the three months ended June 30, 2017, the company recorded a foreign currency exchange loss of $25.4 million, compared to a gain of $8.6 million in the prior year period. This was primarily due to fluctuations in the value of the Euro against the U.S. Dollar, impacting the company's Euro-denominated senior unsecured notes.

Public Storage has a diversified capital structure, including senior unsecured notes and mortgage notes, totaling approximately $420.8 million at June 30, 2017. The company maintained a strong liquidity position with $358.3 million in cash and cash equivalents and $484.6 million in available borrowing capacity on its revolving credit facility, ensuring it can meet its short-term obligations and fund ongoing operations and growth initiatives.

Public Storage plans to grow both organically through the acquisition and development of additional facilities, and potentially through redevelopment. The company had significant development projects underway, totaling approximately $658.6 million in estimated cost, and was actively pursuing acquisitions. While these growth initiatives can cause short-term earnings dilution, they are expected to drive long-term value.