Net Income(loss) Restatement
Previously As
(In thousands) Reported Adjustment Restated
----------- ----------- -----------
Quarter ended September 30, 2006 $ (1,941) $ (21) $ (1,962)
Quarter ended June 30, 2006 $ (30) $ 754 $ 724
Quarter ended March 31, 2006 $ (1,587) $ (38) $ (1,625)
Year ended December 31, 2005 $ 2,777 $ (1,209) $ 1,568
2006 Operating Results
For the year ended December 31, 2006 the Company reported a net loss of
$8.6 million or $(0.15) per share compared to net income (as restated) of
$1.6 million or $0.04 per share for the year ended December 31, 2005. The
2006 results of operations were impacted by the following significant
items:
-- $37.0 million related to increased net operating income (NOI)
primarily due to additional NOI contributions from our 2006 acquisitions
and a full year contribution from our 2005 acquisitions
-- $24.8 million related to increased depreciation expense primarily
attributable to additional depreciation expense related to 2006
acquisitions and a full year of 2005 acquisitions
-- $13.8 million of additional interest expense on loans attributable to
higher amounts of debt in 2006 primarily related to the financing of
certain 2006 acquisitions with additional borrowings
-- $2.7 million of severance costs related to our reorganization efforts
included in General and Administrative (G&A) expense
-- $2.4 million of real estate tax and workers compensation expense
included in property operating expenses as a result of management re-
evaluating its estimate of these expenses
-- $1.9 million write-off of unamortized loan procurement costs in
conjunction with certain financing transactions during the year
-- $1.1 million of lower interest income as a portion of the proceeds
from the Company's October 2005 follow-on equity offering had been invested
in marketable securities during the fourth quarter of 2005
-- $0.6 million related to the settlement of a claim made based on
actions of the Predecessor company prior to the initial public offering
($0.4 million) and professional fees incurred related to our reorganization
($0.2 million) included in G&A expense
-- $0.3 million charge to write-off a property management system that was
replaced during the third quarter of 2006
-- $0.2 million related to the settlement of claims for charges from
January 2005 through June 2006 under the Company's management agreement
with the Amsdell Companies for the Rising Tide properties, included in
operating expense
The Company reported a net loss of $5.7 million or $(0.10) per share for
the quarter ended December 31, 2006, compared to a net loss (as restated)
of $3.2 million or $(0.06) per share for the fourth quarter of 2005.
The 399 owned facilities containing 25.4 million rentable square feet had a
physical occupancy at December 31, 2006 of 78.2% and an average physical
occupancy for the quarter ended December 31, 2006 of 78.6%.
Funds from Operations (FFO):
The following items reconcile the Company's previously issued fourth
quarter 2006 FFO per share guidance of $0.24 to our reported fourth quarter
FFO per share:
-- $0.6 million of write-off of unamortized loan procurement costs
-- $0.4 million of severance costs related to reorganization efforts,
included in G&A expense
-- $0.4 million related to the settlement of a claim made based on
actions of the Predecessor company prior to the initial public offering,
included in G&A expense
-- $0.2 million related to professional fees incurred related to the
reorganization, included in G&A expense
-- $0.2 million related to the settlement of claims for charges from
January 2005 through June 2006 under the Company's management agreement
with the Amsdell Companies for the Rising Tide properties, included in
operating expense
-- $0.7 million of workers compensation expense related to prior policy
periods as a result of management re-evaluating its method of estimating
this expense, included in operating expense
-- $0.8 million of real estate taxes that related to periods prior to the
fourth quarter as a result of management re-evaluating its method of
estimating real estate taxes as well as reconciling prior estimates to
actual real estate tax bills received
After giving effect to these adjustments, the Company is reporting FFO for
the fourth quarter of 2006 of $11.6 million or $0.18 per share. This
compares to a restated FFO for the fourth quarter of 2005 of $9.0 million
or $0.15 per share.
Same-store Results:
During the fourth quarter, in place annual rent per square foot of the 199
same-store facilities grew 5.2% to $12.53 compared to $11.91 during the
fourth quarter of 2005. The same-store realized annual rent per occupied
square foot grew 2.5% to $10.75 from the $10.49 realized during the fourth
quarter of 2005. The same-store facilities average occupancy for the fourth
quarter of 2006 was 79.5% as compared to 83.0% for the same quarter of last
year. Same-store revenues were 0.8% lower in the fourth quarter of 2006
over the restated same-store revenues for the fourth quarter of 2005.
Same-store operating expense comparisons are impacted by a $0.3 million
increase in workers compensation expense, a $0.4 million increase in real
estate taxes, and $0.2 million of the settlement on Rising Tide as
discussed above. The $1.2 million, or 11.0%, increase in same-store
operating expenses includes the impact of these items. Adjusting for the
effect of these items, same-store operating expenses grew 2.8%, or
approximately $0.3 million, for the fourth quarter of 2006 over the fourth
quarter of 2005, as restated.
The 199 same-store facilities contain approximately 12.9 million rentable
square feet, representing approximately 50.7% of the aggregate rentable
square feet of the Company's 399 owned facilities at December 31, 2006.
These same-store facilities represent approximately 56.5% of property net
operating income for the quarter ended December 31, 2006.
Chief Executive Officer and President Dean Jernigan commented, "The 2006
goals that I outlined when I first joined the Company have been
accomplished. Furthermore, our property operations team has been able to
carry this momentum into 2007. I remain optimistic about our near-term
internal growth prospects. I certainly did not expect to encounter the
various accounting and reporting issues that we have unfortunately had to
correct. I am pleased that we have been able to resolve these matters in a
very compressed time frame and appreciate the patience of our shareholders
as we completed our work."
First Quarter and Full Year 2007 Financial Outlook
The Company estimates that its fully diluted FFO per share for the three
months ended March 31, 2007 will be between $0.21 and $0.23 and that its
fully diluted loss per share will be between $(0.04) and $(0.02). The
Company's estimate is based on the following key assumptions:
-- General and Administrative expenses of approximately $5.0 million
-- Same-store occupancy of 79.5-80.0%
-- Same-store revenue growth of 4-5% over the first quarter of 2006
-- Same-store expense growth of 8-9% over the first quarter of 2006
-- Same-store NOI growth of 1-3% over the first quarter of 2006
-- Acquisitions of approximately $19 million
-- The Company expects to incur approximately $1.0 million of legal costs
related to its inquiry into actions taken by former Officers of the
Company.
In 2007, same-store properties are defined as the 339 same-store facilities
containing approximately 20.8 million rentable square feet that we owned
during all of 2006.
The Company is revising its previous 2007 earnings guidance to reflect the
above-mentioned $1.0 million of legal costs. The revised FFO per share
guidance is $1.09 to $1.19 and EPS guidance is $0.04 to $0.14.
Chief Financial Officer Christopher Marr said, "During the last quarter we
have been able to add additional senior management personnel to our
Accounting/Finance and Information Technology teams. We continue to
develop and implement processes and policies which are designed to
strengthen internal controls as well as position the company to meet our
growth objectives. While the challenges with respect to filing our Annual
Report on Form 10-K have been significant, we continue to implement our
business plan and fully anticipate we should be able meet our financial
projections for 2007."
Distributions
On February 21, 2007, the Board of Directors declared a quarterly
distribution of $0.29 per share, payable on April 24, 2007 to shareholders
of record on April 9, 2007.
Conference Call
Management will host a conference call at 11:00 a.m. EDT on Wednesday,
March 21, 2007 to discuss financial results for 2006 and its outlook for
2007. A live webcast of the conference call will be available online from
the investor relations page of the Company's corporate website at
www.u-store-it.com. The dial-in numbers are (877) 407-8035 for domestic
callers and (201) 689-8035 for international callers. The reservation
number for both is 229387. After the live webcast, the call will remain
available on
U-Store-It's website for thirty days. In addition, a telephonic replay of
the call will be available until April 21, 2007. The replay dial-in number
is (877) 660-6853 for domestic callers, (201) 612-7415 for international
callers. The replay reservation number is 229387. Supplemental operating
and financial data as of December 31, 2006 is available on our corporate
website under the heading "Investor Relations and Corporate Information."
About U-Store-It Trust
U-Store-It Trust is a self-administered and self-managed real estate
investment trust. The Company's self-storage facilities are designed to
offer affordable, easily accessible and secure storage space for
residential and commercial customers. According to the Self-Storage
Almanac, U-Store-It Trust is one of the top five owners and operators of
self-storage facilities in the United States.
Non-GAAP Performance Measurements
FFO is a widely used performance measure for real estate companies and is
provided here as a supplemental measure of operating performance. The
Company calculates FFO in accordance with the best practices described in
the April 2002 National Policy Bulletin of the National Association of Real
Estate Investment Trusts (the "White Paper"). The White Paper defines FFO
as net income (computed in accordance with GAAP), excluding gains (or
losses) from sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a key performance indicator in evaluating the
operations of the Company's facilities. Given the nature of its business as
a real estate owner and operator, the Company considers FFO a key measure
of its operating performance that is not specifically defined by accounting
principles generally accepted in the United States ("GAAP"). The Company
believes that FFO is useful to management and investors as a starting point
in measuring its operational performance because it excludes various items
included in net income that do not relate to or are not indicative of its
operating performance such as gains (or losses) from sales of property and
depreciation and amortization, which can make periodic and peer analyses of
operating performance more difficult. FFO should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indicator of the Company's financial performance, is not an alternative to
cash flow from operating activities (determined in accordance with GAAP) as
a measure of the Company's liquidity, and is not indicative of funds
available to fund the Company's cash needs, including its ability to make
distributions.
We define net operating income, which we refer to as "NOI," as total
continuing revenues less continuing property operating expenses. NOI also
can be calculated by adding back to net income: interest expense, loan
procurement amortization expense, early extinguishment of debt, minority
interest, loss on sale of storage facilities, depreciation and general and
administrative/management fees to related party, and deducting from net
income: income from discontinued operations, gains on sale of self-storage
facilities, and interest income. NOI is not a measure of performance
calculated in accordance with GAAP.
Management uses NOI as a measure of operating performance at each of our
facilities, and for all of our facilities in the aggregate. NOI should not
be considered as a substitute for operating income, net income, cash flows
provided by operating, investing and financing activities, or other income
statement or cash flow statement data prepared in accordance with GAAP.
Forward-Looking Statements
Certain statements in this release that are not historical fact may
constitute forward-looking statements within the meaning of the Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements are based on assumptions and expectations that
may not be realized and are inherently subject to risks, uncertainties and
other factors, many of which cannot be predicted with accuracy and some of
which might not even be anticipated. Although we believe the expectations
reflected in these forward-looking statements are based on reasonable
assumptions, future events and actual results, performance, transactions or
achievements, financial and otherwise, may differ materially from the
results, performance, transactions or achievements expressed or implied by
the forward-looking statements. Risk, uncertainties and other factors that
might cause such differences, some of which could be material, include but
are not limited to: national and local economic, business, real estate and
other market conditions; the competitive environment in which the Company
operates; the execution of the Company's business plan; financing risks;
increases in interest rates and operating costs; the Company's ability to
maintain its status as a REIT for federal income tax purposes; acquisition
and development risks; changes in real estate and zoning laws or
regulations; risks related to natural disasters; potential environmental
and other liabilities; material weaknesses in our internal financial
reporting; and other factors affecting the real estate industry generally
or the self-storage industry in particular. The Company refers you to the
documents filed by the Company from time to time with the Securities and
Exchange Commission, specifically the section titled "Business - Risk
Factors" in the Company's Annual Report on Form 10-K, which discuss these
and other risks and factors that could cause the Company's actual results
to differ materially from any forward-looking statements.
U-STORE-IT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31,
--------------------------------
(In thousands, except per share data) 2006 2005
(as restated)
--------------- ---------------
ASSETS
Storage facilities $ 1,771,864 $ 1,386,786
Accumulated depreciation (205,049) (140,491)
--------------- ---------------
1,566,815 1,246,295
Cash and cash equivalents 19,716 98,899
Restricted cash 14,126 18,921
Loan procurement costs - net of
amortization 7,575 9,082
Marketable securities - 95,170
Other assets 6,475 7,599
Due from related parties 632 355
--------------- ---------------
Total assets $ 1,615,339 $ 1,476,321
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving credit facility $ 90,500 $ -
Unsecured term loan 200,000 -
Mortgage loans and notes payable 588,930 669,282
Accounts payable and accrued expenses 22,590 17,128
Due to related parties 336 74
Distributions payable 18,197 18,131
Deferred revenue 9,740 8,857
Security deposits 655 685
--------------- ---------------
Total liabilities 930,948 714,157
Minority interests 56,898 63,695
Shareholders' Equity
Common shares $.01 par value,
200,000,000 shares authorized,
57,335,490 and 57,010,162 shares
issued and outstanding
at December 31, 2006 and 2005,
respectively 573 570
Additional paid in capital 794,632 790,372
Accumulated deficit (167,712) (92,473)
--------------- ---------------
Total shareholders' equity 627,493 698,469
--------------- ---------------
Total liabilities and shareholders'
equity $ 1,615,339 $ 1,476,321
=============== ===============
U-STORE-IT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except For the For the
per share data) Three Three For the For the
months months Year Year
ended ended ended ended
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
(as (as
restated) restated)
--------- --------- --------- ---------
REVENUES
Rental income $ 50,649 $ 40,223 $ 197,753 $ 137,202
Other property related
income 4,339 2,837 14,902 10,001
Other - related party 118 130 457 405
--------- --------- --------- ---------
Total revenues 55,106 43,190 213,112 147,608
OPERATING EXPENSES
Property operating expenses 24,614 17,834 86,547 55,462
Property operating expenses
- related party 22 (3) 69 43
Depreciation 17,918 12,316 64,729 39,949
Asset write-off - - 305 -
General and administrative 4,866 8,342 21,675 17,786
General and administrative
- related party 88 240 613 736
Management fees - related
party - - - -
--------- --------- --------- ---------
Total operating
expenses 47,508 38,729 173,938 113,976
OPERATING INCOME 7,598 4,461 39,174 33,632
OTHER INCOME (EXPENSE)
Interest:
Interest expense on
loans (13,139) (9,715) (46,125) (32,370)
Loan procurement
amortization expense (493) (525) (1,998) (2,057)
Write-off of loan
procurement cost due
to early extinguishment
of debt (634) (93) (1,907) (93)
Interest income 203 2,269 1,341 2,405
Other 264 27 191 (47)
--------- --------- --------- ---------
Total other expense (13,799) (8,037) (48,498) (32,162)
INCOME (LOSS) BEFORE MINORITY
INTERESTS (6,201) (3,576) (9,324) 1,470
MINORITY INTERESTS 513 190 773 (113)
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (5,688) (3,386) (8,551) 1,357
DISCONTINUED OPERATIONS
Income from operations - 32 - 32
Gain on sale of storage
facilities - 179 - 179
--------- --------- --------- ---------
Income from
discontinued
operations - 211 - 211
--------- --------- --------- ---------
NET INCOME (LOSS) $ (5,688) $ (3,175) $ (8,551) $ 1,568
========= ========= ========= =========
Basic and diluted earnings
(loss) per share from
continuing operations $ (0.10) $ (0.06) $ (0.15) $ 0.04
Basic and diluted earnings
(loss) per share from
discontinued operations $ - $ 0.00 $ - $ -
--------- --------- --------- ---------
Basic and diluted earnings
(loss) per share $ (0.10) $ (0.06) $ (0.15) $ 0.04
========= ========= ========= =========
Weighted-average basic shares
outstanding 57,412 55,882 57,287 42,120
Weighted-average diluted shares
outstanding 57,412 55,882 57,287 42,203
========= ========= ========= =========
Distributions declared per
common share and unit $ 0.29 $ 0.28 $ 1.16 $ 1.13
========= ========= ========= =========
Same-Store Facility Results (199 facilities)
(unaudited)
Three months ended
December 31,
---------------------- Percent
2006 2005 Change
---------- ---------- ----------
(In thousands, except per square foot
data)
REVENUES
Rental income $ 27,537 $ 28,072
Other property related income 2,327 2,025
---------- ---------- ----------
Total revenues 29,864 30,097 -0.8%
OPERATING EXPENSES
Property taxes (1) 3,767 3,183 18.3%
Personnel expense (2) 4,003 3,184 25.7%
Advertising 997 1,175 -15.1%
Repair and maintenance 366 231 58.4%
Utilities 966 1,166 -17.2%
Property insurance 532 313 70.0%
Other expenses 2,010 2,166 -7.2%
---------- ---------- ----------
Total operating expenses (3) 12,641 11,418 10.7%
Net operating income (4) $ 17,223 $ 18,679 -7.8%
Gross margin 57.7% 62.1%
Period Average Occupancy (5) 79.5% 83.0%
Period End Occupancy (6) 79.0% 82.6%
Total Rentable square feet 12,890,822 12,890,822
Realized annual rent per occupied
square foot (7) $ 10.75 $ 10.49
In place annual rent per square
foot (8) $ 12.53 $ 11.91
Reconciliation of Same-Store Net
Operating Income to Operating Income
Same-store net operating income (4) $ 17,223 $ 18,679
Non same-store net operating income (4) 13,247 6,680
Depreciation (17,918) (12,316)
Asset Write-off - -
General and Administrative
expense (4,954) (8,582)
---------- ----------
Operating Income $ 7,598 $ 4,461
Year ended
December 31,
---------------------- Percent
2006 2005 Change
---------- ---------- ----------
(In thousands, except per square foot
data)
REVENUES
Rental income $ 113,215 $ 109,787
Other property related income 8,603 8,156
---------- ---------- ----------
Total revenues 121,818 117,943 3.3%
OPERATING EXPENSES
Property taxes (1) 13,944 11,676 19.4%
Personnel expense (2) 13,277 12,145 9.3%
Advertising 3,136 3,181 -1.4%
Repair and maintenance 1,302 881 47.8%
Utilities 4,445 4,350 2.2%
Property insurance 1,819 1,316 38.2%
Other expenses 7,673 7,544 1.7%
---------- ---------- ----------
Total operating expenses (3) 45,596 41,093 11.0%
Net operating income (4) $ 76,222 $ 76,850 -0.8%
Gross margin 62.6% 65.2%
Period Average Occupancy (5) 81.3% 82.8%
Period End Occupancy (6) 79.0% 82.6%
Total Rentable square feet 12,890,822 12,890,822
Realized annual rent per occupied
square foot (7) $ 10.80 $ 10.29
In place annual rent per square
foot (8) $ 12.43 $ 11.96
Reconciliation of Same-Store Net
Operating Income to Operating Income
Same-store net operating income (4) $ 76,222 $ 76,850
Non same-store net operating income (4) 50,274 15,253
Depreciation (64,729) (39,949)
Asset Write-off (305) -
General and Administrative
expense (22,288) (18,522)
---------- ----------
Operating Income $ 39,174 $ 33,632
(1) - Includes $0.4 million of the adjustment related to management’s
change in estimate.
(2) - Includes $0.3 million of the worker’s compensation adjustment
relating to management’s change in estimate and $0.2 million
related to the adjustment related to Rising Tide management fees.
(3) – After adjusting for items in footnotes 1 and 2 above, total operating
expenses for the three months ended December 31, 2006 were $11.7
million, representing a 2.8% increase over amounts for the three
months ended December 31, 2005.
(4) – Net operating income (NOI) is a non-GAAP (generally accepted
accounting principles) financial measure that excludes the impact of
depreciation and general & administrative expense. Although
depreciation and general & administrative expense are operating
expenses, we believe that NOI is making decisions with respect to
capital allocations, in determining current property values, and
comparing period-to-period and market-to-market property operating
results. NOI is not a substitute for operating income as determined
in accordance with GAAP in evaluating our operating results.
(5) – Square feet occupancy represents the weighted average occupancy for
the period.
(6) – Represents occupancy at December 31, 2006.
(7) – Realized annual rent per occupied square foot is computed by dividing
rental income by the weighted average occupied square feet for the
period.
(8) – In place annual rent per square foot represents annualized
contractual rents per available square foot for the period.
Non-GAAP Financial Measures - Computation of Funds From Operations (FFO)
(unaudited)
Three months ended Year ended
(In thousands, -------------------------- --------------------------
except per share December 31, December 31, December 31, December 31,
data) 2006 2005 2006 2005
------------ ------------ ------------ ------------
Net income (loss) $ (5,688) $ (3,175) $ (8,551) $ 1,568
Add (deduct):
Real estate
depreciation 17,760 12,316 64,099 39,949
Minority
interests (513) (190) (773) 113
FFO (1) $ 11,559 $ 8,951 $ 54,775 $ 41,630
============ ============ ============ ============
Earnings (loss) per
share - fully
diluted $ (0.10) $ (0.06) $ (0.15) $ 0.04
FFO per share -
fully diluted $ 0.18 $ 0.15 $ 0.87 $ 0.91
Weighted-average
diluted shares
outstanding 57,412 55,882 57,287 42,203
Weighted-average
diluted shares and
units outstanding 62,811 61,232 62,606 45,565
Dividend per Common
Share $ 0.29 $ 0.28 $ 1.16 $ 1.13
Payout ratio of FFO
(Dividend per
share divided by
FFO per share) 158% 192% 133% 124%
(1) Included in FFO is $3.3 million and $6.5 million of items not included
in management's guidance for the three months and year ended
December 31, 2006, respectively. These items include loan procurement
costs, severance costs, an asset write-off, settlement of claims made,
professional fees, workers compensation, and property tax expenses.
Contact Information: Contact: U-Store-It Trust Christopher P. Marr Chief Financial Officer (610) 293-5700