The Glendale, California-based company said second quarter net income improved to $133.8 million from $77.1 million reported in the year-ago period. Net income allocable to common shareholders increased to $68.1 million or $0.40 per share from $14.4 million or $0.08 per share reported for the same period in 2007.
Funds from operations for the quarter remained flat with last year at $1.10 per share. On average, 11 analysts polled by First Call/Thomson Financial expected earnings of $1.10 per share for the quarter.
FFO for the quarter was impacted by incentive compensation with respect to the company's disposition of an interest in Shurgard Europe of $25.4 million. On March 31, an institutional investor acquired a 51% interest in Shurgard Europe's operations. Public Storage owns the remaining 49% interest and is also the managing member of the newly formed joint venture that now owns Shurgard Europe's operations.
FFO for the 2007 quarter was impacted by foreign currency exchange and derivative gains totaling $7.3 million, expenses related to proposed offering of shares in European business amounting to $9.6 million, as well as expenses incurred in connection with the Shurgard Merger totaling $1.3 million. FFO in the previous year was also hurt by expenses related to the company's reorganization as a Maryland REIT amounting to $2.0 million.
Quarterly FFO, before adjustments, rose to $1.25 per share from $1.14 per share in the previous year.
Revenues for the year dropped to $424.14 million from $448.19 million in the previous year, short of Street target of $436.21 million. Self-storage rental income slipped to $381.35 million from $410.97 million, while revenue from Ancillary operations declined to $31.78 million from $36.26 million reported last year.
Income from continuing operations increased to $133.91 million from $77.84 million, largely due to a decline in expenses to $284.62 million from $375.17 million in the previous year.
Amortization expense with respect to domestic assets for the quarter decreased by $33.8 million from last year, primarily due to a reduction in domestic amortization expense associated with intangible assets that the company obtained in the August 22, 2006 acquisition of Shurgard Storage Centers, Inc.
Cash and cash equivalents at June 30, 2008 was $775.00 million, while it was $245.44 million at December 31, 2007. Goodwill for both periods was $174.63 million.
Year-to-date, net income allocable to common shareholders surged to $514.8 million or $3.05 per share from $10.1 million or $0.06 per share for the same period in 2007. Revenues advanced to $886.90 million from $881.75 million.
In May, the company reported first quarter results, posting a surge in profit, boosted by a gain recognized on the disposition of its real estate investments, lower amortization expense, improved operations from its real estate facilities and an increase in foreign currency exchange gain. Quarterly funds from operations per share for the quarter surged 32% from the prior-year period, while revenues increased 7%.
However, after the results were announced Lehman Brothers analyst David Toti said he maintains his "Equal Weight" rating on the company's stock, while reducing the estimates to $83 from $84. Deutsche Bank downgraded the stock to "Hold" from "Buy" and lowered its price target to $88 from $90.
PSA closed Thursday's regular trade at $80.11, down $4.19 or 4.97%, on 2.74 million shares. For the past year, the stock trended in the range of $65.66-$98.01.
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