10-QPeriod: Q2 FY2018

Public Storage Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 1, 2018For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported solid financial performance for the second quarter and first half of 2018. Net income allocable to common shareholders increased significantly, driven by growth in self-storage operations and favorable foreign currency exchange movements. The company demonstrated strong operational execution, with increasing revenues and net operating income in its core self-storage segment, supported by higher rental rates and a growing portfolio of "Non Same Store" facilities. Financially, PSA maintained a strong liquidity position with substantial cash reserves and available borrowing capacity, exceeding its planned capital needs for the upcoming year. The company also continues to actively manage its capital structure, with strategic plans for future development, acquisitions, and potential debt refinancing. Overall, the report indicates a healthy and well-managed REIT with a positive outlook.

Financial Highlights

35 data points
Beta

Revenue

$685.53M

72.1% Gross Margin

Net Income

$405.29M

59.1% Net Margin

EPS (Diluted)

$2.00

Total Assets

$10.69B

Cash & Equivalents

$338.42M

Free Cash Flow

$520.75M

Financial Statements
Beta
Revenue$685.53M
Cost of Revenue$190.98M
Gross Profit$494.55M
Operating Expenses$350.47M
Operating Income$343.44M
Interest Expense$8.39M
Net Income$405.29M
EPS (Basic)$2.00
EPS (Diluted)$2.00
Shares Outstanding (Basic)173.93M
Shares Outstanding (Diluted)174.22M

Key Highlights

  • 1Net income allocable to common shareholders increased by 26% for the three months ended June 30, 2018, to $348.3 million, or $2.00 per diluted share, compared to $276.7 million, or $1.59 per diluted share, in the prior year period.
  • 2Self-storage revenues increased by 3.4% for the three months ended June 30, 2018, and by 3.6% for the six months ended June 30, 2018, driven by both 'Same Store' and 'Non Same Store' facilities.
  • 3Net operating income from self-storage operations saw a 2.7% increase for the three months and a 2.9% increase for the six months ended June 30, 2018, year-over-year.
  • 4Funds From Operations (FFO) per diluted common share grew by 14.7% to $2.65 for the three months ended June 30, 2018, and by 8.0% to $5.02 for the six months ended June 30, 2018, compared to the prior year periods.
  • 5The company maintained a strong liquidity position with approximately $1.2 billion in capital resources expected over the next year, exceeding planned capital needs of $551.5 million.
  • 6Foreign currency exchange gains of $21.9 million were recorded for the three months ended June 30, 2018, positively impacting net income due to fluctuations in the Euro-denominated debt.
  • 7Public Storage is actively engaged in growth initiatives, with development and redevelopment projects totaling $679.2 million in estimated costs as of June 30, 2018, and has 14 self-storage facilities under contract for acquisition post-quarter end.

Frequently Asked Questions

For the three months ended June 30, 2018, Public Storage's total revenues increased to $685.5 million from $664.3 million in the same period of 2017, representing a 3.4% increase. Self-storage facility revenues, the primary driver, rose to $645.2 million from $624.2 million.

Public Storage has a substantial development and redevelopment pipeline with an estimated total cost of $679.2 million as of June 30, 2018, with $445.2 million remaining to be spent. Additionally, subsequent to the quarter, the company entered into contracts to acquire 14 self-storage facilities for $95.2 million. The company continues to seek acquisitions but faces significant competition.

For the three months ended June 30, 2018, Public Storage recorded a foreign currency exchange gain of $21.9 million, compared to a loss of $25.4 million in the prior year period. This was primarily due to fluctuations in exchange rates affecting the company's Euro-denominated unsecured notes, positively impacting net income in the current period.

As of June 30, 2018, Public Storage had approximately $1.2 billion in estimated capital resources available over the next year, including $338.4 million in cash and $483.9 million in available borrowing capacity on its revolving credit facility. This is expected to cover planned capital needs of approximately $551.5 million, which include remaining development spend and property acquisitions. The company plans to fund future capital requirements through retained operating cash flow, debt issuance, and equity offerings.