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Section 1: 10-Q (10-Q)

psa-20190630x10q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

or

[   ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________.

Commission File Number: 001-33519

Public Storage
(Exact name of registrant as specified in its charter)

Maryland

95-3551121

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification Number)

701 Western Avenue, Glendale, California

91201-2349

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (818) 244-8080.

Title of Class

 

Trading Symbol

 

Name of exchange on which registered

Common Shares, $0.10 par value

 

PSA

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.625% Cum Pref Share, Series U, $0.01 par value

PSAPrU

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.375% Cum Pref Share, Series V, $0.01 par value

PSAPrV

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series W, $0.01 par value

PSAPrW

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series X, $0.01 par value

PSAPrX

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.875% Cum Pref Share, Series A, $0.01 par value

PSAPrA

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.400% Cum Pref Share, Series B, $0.01 par value

PSAPrB

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.125% Cum Pref Share, Series C, $0.01 par value

PSAPrC

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.950% Cum Pref Share, Series D, $0.01 par value

PSAPrD

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 4.900% Cum Pref Share, Series E, $0.01 par value

PSAPrE

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.150% Cum Pref Share, Series F, $0.01 par value

PSAPrF

New York Stock Exchange


Depositary Shares Each Representing 1/1,000 of a 5.050% Cum Pref Share, Series G, $0.01 par value

PSAPrG

New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.600% Cum Pref Share, Series H, $0.01 par value

PSAPrH

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.

[X] Yes [   ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated
filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

[X]

[ ]

[ ]

[ ]

[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

Indicate the number of the registrant’s outstanding common shares of beneficial interest, as of July 29, 2019:

Common Shares of beneficial interest, $0.10 par value per share – 174,597,753 shares


PUBLIC STORAGE

INDEX

PART I

FINANCIAL INFORMATION

Pages

Item 1.

Financial Statements (Unaudited)

Balance Sheets at June 30, 2019 and December 31, 2018

1

Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018

2

Statements of Comprehensive Income for the Three and Six Months Ended
June 30, 2019 and 2018

3

Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018

4-7

Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

8-9

Condensed Notes to Financial Statements

10-30

Item 2.

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

31-60

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4.

Controls and Procedures

61

PART II

OTHER INFORMATION (Items 3, 4 and 5 are not applicable)

Item 1.

Legal Proceedings

62

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 6.

Exhibits

62

 


PUBLIC STORAGE

BALANCE SHEETS

(Amounts in thousands, except share data)

June 30,

December 31,

2019

2018

ASSETS

(Unaudited)

Cash and equivalents

$

360,331 

$

361,218 

Real estate facilities, at cost:

Land

4,116,718 

4,047,982 

Buildings

11,665,027 

11,248,862 

15,781,745 

15,296,844 

Accumulated depreciation

(6,375,132)

(6,140,072)

9,406,613 

9,156,772 

Construction in process

191,874 

285,339 

9,598,487 

9,442,111 

Investments in unconsolidated real estate entities

778,523 

783,988 

Goodwill and other intangible assets, net

210,178 

209,856 

Other assets

165,772 

131,097 

Total assets

$

11,113,291 

$

10,928,270 

LIABILITIES AND EQUITY

Notes payable

$

1,908,110 

$

1,412,283 

Accrued and other liabilities

410,671 

371,259 

Total liabilities

2,318,781 

1,783,542 

Commitments and contingencies (Note 12)

 

 

Equity:

Public Storage shareholders’ equity:

Preferred Shares, $0.01 par value, 100,000,000 shares authorized,

149,500 shares issued (in series) and outstanding, (161,000 at

December 31, 2018), at liquidation preference

3,737,500 

4,025,000 

Common Shares, $0.10 par value, 650,000,000 shares authorized,

174,294,523 shares issued and outstanding (174,130,881 shares at

December 31, 2018)

17,429 

17,413 

Paid-in capital

5,729,945 

5,718,485 

Accumulated deficit

(648,391)

(577,360)

Accumulated other comprehensive loss

(67,549)

(64,060)

Total Public Storage shareholders’ equity

8,768,934 

9,119,478 

Noncontrolling interests

25,576 

25,250 

Total equity

8,794,510 

9,144,728 

Total liabilities and equity

$

11,113,291 

$

10,928,270 

 


See accompanying notes.

1


PUBLIC STORAGE

STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Revenues:

Self-storage facilities

$

669,339 

$

645,206 

$

1,319,747 

$

1,276,743 

Ancillary operations

41,611 

40,322 

80,241 

78,709 

710,950 

685,528 

1,399,988 

1,355,452 

Expenses:

Self-storage cost of operations

196,083 

179,876 

389,739 

362,063 

Ancillary cost of operations

11,653 

11,101 

22,198 

21,741 

Depreciation and amortization

126,859 

119,777 

248,800 

237,756 

General and administrative

15,264 

31,329 

34,767 

62,849 

Interest expense

12,254 

8,388 

20,397 

16,495 

362,113 

350,471 

715,901 

700,904 

Interest and other income

8,582 

6,328 

15,547 

11,872 

Equity in earnings of unconsolidated real estate entities

18,914 

41,963 

36,586 

72,758 

Foreign currency exchange (loss) gain

(5,218)

21,944 

2,573 

10,126 

Gain on sale of real estate

341 

-

341 

424 

Net income

371,456 

405,292 

739,134 

749,728 

Allocation to noncontrolling interests

(1,400)

(1,490)

(2,557)

(2,929)

Net income allocable to Public Storage shareholders

370,056 

403,802 

736,577 

746,799 

Allocation of net income to:

Preferred shareholders - distributions

(53,525)

(54,077)

(108,537)

(108,158)

Preferred shareholders - redemptions (Note 8)

(8,861)

-

(17,394)

-

Restricted share units

(1,259)

(1,425)

(2,492)

(2,522)

Net income allocable to common shareholders

$

306,411 

$

348,300 

$

608,154 

$

636,119 

Net income per common share:

Basic

$

1.76 

$

2.00 

$

3.49 

$

3.66 

Diluted

$

1.76 

$

2.00 

$

3.49 

$

3.65 

Basic weighted average common shares outstanding

174,253 

173,932 

174,215 

173,912 

Diluted weighted average common shares outstanding

174,542 

174,224 

174,459 

174,186 

 

See accompanying notes.

2


PUBLIC STORAGE

STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Net income

$

371,456 

$

405,292 

$

739,134 

$

749,728 

Other comprehensive income (loss):

Aggregate foreign currency exchange (loss) gain

(6,796)

8,194 

(916)

589 

Adjust for aggregate foreign currency exchange

loss (gain) included in net income

5,218 

(21,944)

(2,573)

(10,126)

Other comprehensive loss

(1,578)

(13,750)

(3,489)

(9,537)

Total comprehensive income

369,878 

391,542 

735,645 

740,191 

Allocation to noncontrolling interests

(1,400)

(1,490)

(2,557)

(2,929)

Comprehensive income allocable to

Public Storage shareholders

$

368,478 

$

390,052 

$

733,088 

$

737,262 

 

See accompanying notes.

3


PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2019

(Amounts in thousands, except share and per share amounts)

(Unaudited)

Accumulated

Total

Cumulative

Other

Public Storage

Preferred

Common

Paid-in

Accumulated

Comprehensive

Shareholders’

Noncontrolling

Total

Shares

Shares

Capital

Deficit

Loss

Equity

Interests

Equity

Balances at March 31, 2019

$

4,025,000 

$

17,422 

$

5,708,699 

$

(615,329)

$

(65,971)

$

9,069,821 

$

24,800 

$

9,094,621 

Redemption of 11,500 preferred shares (Note 8)

(287,500)

-

-

-

-

(287,500)

-

(287,500)

Issuance of common shares in connection with

share-based compensation (79,231 shares)

-

7 

15,790 

-

-

15,797 

-

15,797 

Share-based compensation expense, net of cash

paid in lieu of common shares

-

-

5,456 

-

-

5,456 

-

5,456 

Contributions by noncontrolling interests

-

-

-

-

-

-

1,106 

1,106 

Net income

-

-

-

371,456 

-

371,456 

-

371,456 

Net income allocated to noncontrolling interests

-

-

-

(1,400)

-

(1,400)

1,400 

-

Distributions to equity holders:

Preferred shares (Note 8)

-

-

-

(53,525)

-

(53,525)

-

(53,525)

Noncontrolling interests

-

-

-

-

-

-

(1,730)

(1,730)

Common shares and restricted share units

($2.00 per share)

-

-

-

(349,593)

-

(349,593)

-

(349,593)

Other comprehensive loss (Note 2)

-

-

-

-

(1,578)

(1,578)

-

(1,578)

Balances at June 30, 2019

$

3,737,500 

$

17,429 

$

5,729,945 

$

(648,391)

$

(67,549)

$

8,768,934 

$

25,576 

$

8,794,510 


See accompanying notes.

4


 PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2018

(Amounts in thousands, except share and per share amounts)

(Unaudited)