10-QPeriod: Q3 FY2017

Public Storage Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 1, 2017For 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 30, 2017. For the nine months, net income allocable to common shareholders increased slightly to $837.5 million ($4.81 per diluted share) from $831.1 million ($4.78 per diluted share) in the prior year. This growth was driven by a $53.1 million increase in self-storage net operating income, partly offset by higher foreign exchange losses and the impact of Hurricanes Harvey and Irma. The company also saw an increase in FFO per share to $7.00 from $6.94, reflecting solid operational performance despite challenging market conditions. The balance sheet shows a significant increase in cash and cash equivalents, rising to $694.2 million from $183.7 million at year-end 2016, primarily due to new debt issuance. The company continued its development and acquisition strategy, adding 14 self-storage facilities in the nine-month period and having further projects underway. Despite a slight decrease in diluted earnings per share for the three-month period compared to the prior year, largely due to increased preferred dividend allocations and hurricane-related losses, the overall financial health remains robust. The company's strong balance sheet, ample liquidity, and consistent operational performance in its core self-storage business position it well for continued growth. Investors should note the ongoing strategic investments in development and acquisitions, as well as the company's proactive debt management, including a substantial new unsecured note issuance.

Financial Highlights

35 data points
Beta

Revenue

$686.36M

72.2% Gross Margin

Net Income

$358.27M

52.2% Net Margin

EPS (Diluted)

$1.61

Total Assets

$10.77B

Cash & Equivalents

$694.23M

Free Cash Flow

$537.19M

Financial Statements
Beta
Revenue$686.36M
Cost of Revenue$190.62M
Gross Profit$495.74M
Operating Expenses$326.25M
Operating Income$360.11M
Interest Expense$2.39M
Net Income$358.27M
EPS (Basic)$1.61
EPS (Diluted)$1.61
Shares Outstanding (Basic)173.72M
Shares Outstanding (Diluted)174.24M

Key Highlights

  • 1Net income allocable to common shareholders for the nine months ended September 30, 2017, was $837.5 million, a slight increase from $831.1 million in the prior year.
  • 2Diluted earnings per share for the nine months were $4.81, up from $4.78 in the prior year.
  • 3Funds From Operations (FFO) per diluted share increased to $7.00 for the nine months ended September 30, 2017, from $6.94 in the same period last year.
  • 4Cash and cash equivalents significantly increased to $694.2 million at September 30, 2017, from $183.7 million at December 31, 2016.
  • 5The company acquired 14 self-storage facilities during the nine months ended September 30, 2017, for $81.7 million.
  • 6Public Storage issued $1.0 billion in aggregate principal amount of unsecured notes in September 2017.
  • 7Hurricanes Harvey and Irma resulted in an $7.8 million casualty loss and $5.2 million in incremental tenant reinsurance losses.

Frequently Asked Questions

For the three months ended September 30, 2017, total revenues were $686.4 million, an increase from $663.1 million in the same period of 2016, primarily driven by a $13.0 million increase in revenues from Same Store Facilities due to higher realized annual rent per occupied square foot.

The company recorded a $7.8 million casualty loss due to physical damage and associated expenses from Hurricanes Harvey and Irma. Additionally, there were $5.2 million in incremental tenant reinsurance losses. Current estimates suggest these losses are below insurance deductibles, so no insurance proceeds are expected.

Public Storage plans to grow organically through acquisitions and development of additional facilities. They acquired 14 facilities in the first nine months of 2017 and have ongoing development projects underway. The company also utilizes debt financing, as evidenced by the $1.0 billion unsecured note issuance in September 2017, and manages its capital structure with a focus on maintaining strong credit ratings.

As of September 30, 2017, Public Storage had $1.4 billion in debt outstanding. The company has a $500 million revolving credit facility, of which $481.3 million was available at quarter-end. With $694.2 million in cash and expected retained operating cash flow, the company believes its capital resources are sufficient to meet its upcoming obligations and planned capital needs.