(Source: Business Wire)
Public Storage (NYSE:PSA) announced today operating results for the second quarter ended June 30, 2009.
Operating Results for the Three Months Ended June 30, 2009
Net income to our shareholders for the three months ended June 30, 2009 was $199.2 million compared to $133.8 million for the same period in 2008, representing an increase of $65.4 million. This increase is primarily due to (i) a $33.2 million foreign exchange gain during the quarter ended June 30, 2009, (ii) a $25.4 million reduction in general and administrative expenses due to incentive compensation incurred in the quarter ended June 30, 2008 related to our disposition of an interest in Shurgard Europe, and (iii) an $11.0 million reduction in depreciation and amortization, primarily due to reduced intangible amortization, offset by (iv) a reduction in Same Store facility operations and (v) an impairment charge included in discontinued operations with respect to intangible assets totaling $8.2 million in the quarter ended June 30, 2009.
Revenues for the Same Store Facilities decreased 3.5% or $12.6 million in the quarter ended June 30, 2009 as compared to the same period in 2008, due to a 2.9% reduction in realized rent per occupied square foot, combined with a 1.1% reduction in average occupancies. Cost of operations for the Same Store Facilities declined 3.4% or $4.1 million in the quarter ended June 30, 2009 as compared to the same period in 2008, due primarily to a $2.6 million reduction in media advertising and a $1.5 million reduction in repairs and maintenance, offset by a 4.3% ($1.5 million) increase in property tax expense.
For the three months ended June 30, 2009, net income allocable to our common shareholders (after allocating net income to our preferred and equity shareholders) was $135.5 million or $0.80 per common share on a diluted basis compared to $68.0 million or $0.40 per common share on a diluted basis for the same period in 2008, representing an increase of $67.5 million or $0.40 per common share on a diluted basis. These increases are primarily due to the impact of the factors described above.
Weighted average diluted common shares were 168,528,000 and 168,479,000, respectively, for the three months ended June 30, 2009 and 2008.
Operating Results for the Six Months Ended June 30, 2009
Net income to our shareholders for the six months ended June 30, 2009 was $416.2 million compared to $646.2 million for the same period in 2008, representing a decrease of $230.0 million. This decrease is primarily due to (i) a gain of $341.8 million in the six months ended June 30, 2008 related to our disposition of an interest in Shurgard Europe and (ii) an impairment charge included in discontinued operations with respect to intangible assets totaling $8.2 million in the six months ended June 30, 2009, (iii) a foreign exchange gain of $41.0 million during the same period in 2008, and (iv) a reduction in Same Store operations, partially offset by (v) a $72.0 million reduction in earnings allocated to our preferred partnership unitholders in the first quarter of 2009 associated with the redemption of securities, (vi) a reduction in general and administrative expenses due to $27.9 million in incentive compensation incurred in the six months ended June 30, 2008 related to our disposition of an interest in Shurgard Europe, and (vii) a $26.5 million reduction in depreciation and amortization related to our domestic assets, primarily representing reduced intangible amortization.
Revenues for the Same Store Facilities decreased 2.2% or $15.4 million in the six months ended June 30, 2009 as compared to the same period in 2008, due to a 1.5% reduction in realized rent per occupied square foot, combined with a 1.1% reduction in average occupancies. Cost of operations for the Same Store Facilities declined 1.2% or $2.9 million in the six months ended June 30, 2009 as compared to the same period in 2008, due primarily to a $1.4 million reduction in media advertising and a $2.2 million reduction in repairs and maintenance, offset by a 4.1% ($2.9 million) increase in property tax expense.
For the six months ended June 30, 2009, net income allocable to our common shareholders (after allocating net income to our preferred and equity shareholders) was $295.0 million or $1.75 per common share on a diluted basis compared to $512.8 million or $3.04 per common share on a diluted basis for the same period in 2008, representing a decrease of $217.8 million or $1.29 per common share on a diluted basis. These decreases are primarily due to the impact of the factors described above.
Weighted average diluted common shares were 168,501,000 and 168,731,000, respectively, for the six months ended June 30, 2009 and 2008.
Funds from Operations
For the three months ended June 30, 2009, funds from operations ("FFO") increased to $1.40 per common share on a diluted basis as compared to $1.10 per common share for the same period in 2008, representing an increase of $0.30 per common share, or 27.3%.
For the three months ended June 30, 2009, FFO was impacted by (i) a foreign currency exchange gain totaling $33.2 million (compared to an exchange loss of $2,000 for the same period in 2008) and (ii) an impairment charge with respect to an intangible asset resulting from an eminent domain proceeding totaling $8.2 million. For the three months ended June 30, 2008, FFO was impacted as a result of incentive compensation with respect to our disposition of an interest in Shurgard Europe included in general and administrative expense totaling $25.4 million.
For the six months ended June 30, 2009, FFO increased to $2.91 per common share on a diluted basis as compared to $2.49 per common share for the same period in 2008, representing an increase of $0.42 per share, or 16.9%.
For the six months ended June 30, 2009, FFO has been impacted by (i) a foreign currency exchange loss totaling $1.5 million (compared to a gain of $41.0 million for the same period in 2008), (ii) an impairment charge with respect to an intangible asset resulting from an eminent domain proceeding totaling $8.2 million, (iii) costs incurred to terminate and wind down our truck rental operations of $3.5 million, (iv) a $78.2 million reduction in the allocation of net income to our preferred shareholders and unitholders pursuant to the redemption of our preferred securities, combined with our pro-rata share ($16.3 million) of PS Business Park's ("PSB") earnings representing the benefit from its preferred securities repurchases which is included in equity in earnings, and (v) a gain on the early redemption of debt totaling $4.1 million. FFO for the six months ended June 30, 2008 was also impacted by incentive compensation with respect to our disposition of an interest in Shurgard Europe included in general and administrative expense totaling $27.9 million.
The following table provides a summary of the impact of these items that occurred during the three and six months ended June 30, 2009 and 2008:
Three Months Ended June 30, Six Months Ended June 30, Percentage Percentage 2009 2008 Change 2009 2008 Change FFO per common share prior to adjustments for the following items $ 1.25 $ 1.25 - $ 2.41 $ 2.42 (0.4 )% Foreign currency exchange (loss) gain, net 0.20 - (0.01 ) 0.24 Impairment charge on intangible asset resulting from an eminent domain proceeding (0.05 ) - (0.05 ) - Costs incurred to terminate truck rental operations - - (0.02 ) - Increased income allocated to common shareholders, and from preferred equity shareholders, pursuant to preferred redemptions, including our equity share from PSB - - 0.56 - Gain on early redemption of debt - - 0.02 - Incremental incentive compensation incurred in connection with the disposition of an interest in Shurgard Europe - (0.15 ) - (0.17 ) FFO per common share, as reported $ 1.40 $ 1.10 27.3 % $ 2.91 $ 2.49 16.9 % -------------------------------------------------------------------------------
Property Operations -- Same Store Facilities
The Same Store group of facilities represents those 1,899 facilities that we have owned, and have been operated on a stabilized basis, since January 1, 2007 and therefore provide meaningful comparisons for 2007, 2008, and 2009. The following table summarizes the historical operating results of these 1,899 facilities (117.5 million net rentable square feet) that represent approximately 93% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2009.
Selected Operating Data for the Same Store Facilities (1,899 Facilities): Three Months Ended June 30, Six Months Ended June 30, 2009 2008 PercentageChange 2009 2008 PercentageChange (Dollar amounts in thousands, except for weighted average data) Revenues: Rental income $ 330,854 $ 344,703 (4.0 )% $ 662,393 $ 680,256 (2.6 )% Late charges and admin fees collected 15,985 14,758 8.3 % 31,631 29,196 8.3 % Total revenues (a) 346,839 359,461 (3.5 )% 694,024 709,452 (2.2 )% Cost of operations: Property taxes 36,659 35,156 4.3 % 74,421 71,505 4.1 % Direct property payroll 23,339 23,329 0.0 % 47,699 47,706 0.0 % Media advertising 7,224 9,836 (26.6 )% 15,382 16,783 (8.3 )% Other advertising and promotion 5,967 5,027 18.7 % 10,581 9,453 11.9 % Utilities 7,899 8,360 (5.5 )% 17,497 17,797 (1.7 )% Repairs and maintenance 9,159 10,679 (14.2 )% 19,875 22,077 (10.0 )% Telephone reservation center 2,817 3,318 (15.1 )% 5,611 6,441 (12.9 )% Property insurance 2,566 2,911 (11.9 )% 5,264 6,124 (14.0 )% Other costs of management 20,796 21,910 (5.1 )% 45,103 46,496 (3.0 )% Total cost of operations (a) 116,426 120,526 (3.4 )% 241,433 244,382 (1.2 )% Net operating income $ 230,413 $ 238,935 (3.6 )% $ 452,591 $ 465,070 (2.7 )% Gross margin 66.4 % 66.5 % (0.2 )% 65.2 % 65.6 % (0.6 )% Weighted average for the period: Square foot occupancy (b) 90.0 % 91.0 % (1.1 )% 88.9 % 89.9 % (1.1 )% Realized annual rent per occupied square foot (c)(d) $ 12.52 $ 12.90 (2.9 )% $ 12.69 $ 12.88 (1.5 )% REVPAF (e)(d) $ 11.27 $ 11.74 (4.0 )% $ 11.28 $ 11.58 (2.6 )% Weighted average June 30: Square foot occupancy 90.7 % 91.7 % (1.1 )% In place annual rent per occupied square foot (f) $ 13.61 $ 14.20 (4.2 )% Total net rentable square feet (in thousands) 117,462 117,462 - -------------------------------------------------------------------------------
a) See attached reconciliation of these amounts to our consolidated self-storage revenues and operating expenses. Revenues and cost of operations do not include ancillary revenues and expenses generated at the facilities with respect to tenant reinsurance, retail sales and truck rentals. "Other costs of management" included in cost of operations principally represents all the indirect costs incurred in the operations of the facilities. Indirect costs principally include supervisory costs and corporate overhead cost incurred to support the operating activities of the facilities. b) Square foot occupancies represent weighted average occupancy levels over the entire period. c) Realized annual rent per occupied square foot is computed by annualizing the result of dividing rental income (which excludes late charges and administrative fees) by the weighted average occupied square feet for the period. Realized annual rent per occupied square foot takes into consideration promotional discounts and other items that reduce rental income from the contractual amounts due. d) Late charges and administrative fees are excluded from the computation of realized annual rent per occupied square foot and REVPAF. Exclusion of these amounts provides a better measure of our ongoing level of revenue, by excluding the volatility of late charges, which are dependent principally upon the level of tenant delinquency, and administrative fees, which are dependent principally upon the absolute level of move-ins for a period.
