10-QPeriod: Q2 FY2019

Public Storage Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 30, 2019For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) reported its second-quarter 2019 financial results, showcasing continued revenue growth in its core self-storage operations. For the three months ended June 30, 2019, revenue increased by 3.7% year-over-year to $710.95 million, driven by a 1.9% rise in same-store revenue, attributed to higher rental rates. Net income allocable to common shareholders decreased to $306.4 million ($1.76 per diluted share) from $348.3 million ($2.00 per diluted share) in the prior year's quarter, impacted by foreign currency fluctuations and equity share of gains from an investment. For the six months ended June 30, 2019, revenue grew 3.4% to $1.4 billion, while net income allocable to common shareholders decreased to $608.2 million ($3.49 per diluted share) from $636.1 million ($3.65 per diluted share), primarily due to a significant equity share of gains on sale of assets by PS Business Parks in the prior year. The company's balance sheet showed total assets of $11.11 billion at June 30, 2019, with real estate facilities representing the largest component. Liabilities increased, notably notes payable rising to $1.91 billion from $1.41 billion at year-end 2018, partly due to new senior note issuances. Despite the decrease in net income, the company maintained a strong liquidity position with approximately $1.1 billion in expected capital resources for the next year, exceeding identified capital needs of $415.1 million. Management highlighted strategic investments in development and acquisitions, alongside effective management of operating costs and a focus on maintaining strong credit metrics.

Financial Highlights

35 data points
Beta

Revenue

$710.95M

70.8% Gross Margin

Net Income

$371.46M

52.2% Net Margin

EPS (Diluted)

$1.76

Total Assets

$11.11B

Cash & Equivalents

$360.33M

Free Cash Flow

$545.35M

Financial Statements
Beta
Revenue$710.95M
Cost of Revenue$207.74M
Gross Profit$503.21M
Operating Expenses$362.11M
Interest Expense$12.25M
Net Income$371.46M
EPS (Basic)$1.76
EPS (Diluted)$1.76
Shares Outstanding (Basic)174.25M
Shares Outstanding (Diluted)174.54M

Key Highlights

  • 1Revenue from self-storage operations increased 3.7% year-over-year to $710.95 million for the three months ended June 30, 2019.
  • 2Same-store revenue increased by 1.9% in the quarter, driven by higher rental rates per occupied square foot.
  • 3Net income allocable to common shareholders decreased to $306.4 million ($1.76/share) for the quarter, down from $348.3 million ($2.00/share) in Q2 2018, impacted by foreign currency and investment gains in the prior year.
  • 4Total assets grew to $11.11 billion as of June 30, 2019, with real estate facilities constituting the majority.
  • 5Notes payable increased to $1.91 billion from $1.41 billion at year-end 2018, reflecting new debt issuances.
  • 6The company reported strong liquidity, with expected capital resources of approximately $1.1 billion for the next year, exceeding identified capital needs of $415.1 million.
  • 7Management continues to invest in development and acquisitions, with $328.6 million in remaining spending on the current development pipeline.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in rental income from self-storage facilities. Same-store revenue saw a 1.9% increase due to higher realized annual rent per occupied square foot, coupled with contributions from newly acquired, developed, and expanded facilities.

The decrease in net income allocable to common shareholders was primarily due to a $27.2 million impact from foreign currency exchange fluctuations (losses in 2019 vs. gains in 2018), a $24.0 million decrease in equity share of gains on sale of assets from PS Business Parks (recognized in Q2 2018), and an $8.9 million allocation to preferred shareholders related to preferred share redemptions in Q2 2019. These were partially offset by an increase in self-storage net operating income.

Public Storage maintained a strong liquidity position with approximately $1.1 billion in expected capital resources for the next year, exceeding identified capital needs of $415.1 million. The company has a $500 million revolving credit facility, which had no outstanding borrowings as of June 30, 2019, and significant cash on hand. Notes payable increased due to new debt issuances, but the company has no substantial principal payments due until 2022, and its long-term debt maturity profile is manageable.

Public Storage continues to actively invest in growth. Subsequent to the quarter end, they were under contract to acquire ten self-storage facilities for $86.5 million. They also have ongoing development and expansion projects with approximately $328.6 million in remaining costs to complete, aiming to add significant net rentable square feet over the next 18 months. The company plans to fund these activities through retained operating cash flow, debt, and equity issuances.