CLEVELAND, OH -- (MARKET WIRE) -- 08/07/06 --
U-Store-It Trust (the "Company") (NYSE: YSI),
today announced operating results for the three months ended June 30, 2006.
The Company reported a net loss of $30 thousand for the quarter ended June
30, 2006, and reported no earnings per share as compared to net income of
$2.2 million or $0.06 per share for the second quarter of 2005.
The 383 owned facilities containing 24.2 million net rentable square feet
had a physical occupancy at June 30, 2006 of 82.2% and an average physical
occupancy for the quarter of 81.2%. This compares to a physical occupancy
of the 374 facilities owned at March 31, 2006 of 79.7%.
During the second quarter 2006, the Company identified an immaterial
accounting error related to certain tenant receivable transactions. The
misstatement relates to the period in which the revenue related to certain
tenants had been recognized. The Company evaluated the impact of these
errors and concluded that the impact was not material to prior periods.
Accordingly, a non-cash adjustment of approximately $1 million to reduce
rental revenues was recorded in the second quarter to correct the
cumulative impact of these errors. This adjustment will have no impact on
future earnings.
During the quarter the Company reviewed its calculation of Funds from
Operations ("FFO") and determined that it was more appropriate to exclude
depreciation related to certain non-real estate assets from its
calculation. Accordingly a non-cash adjustment of approximately $310
thousand was made to reduce its second quarter 2006 FFO. Approximately $148
thousand related to the first quarter of 2006 and $162 thousand related to
the second quarter of 2006.
Funds from Operations:
Prior to giving effect to the adjustments described above, FFO attributable
to common shareholders for the second quarter of 2006 was $15.4 million or
$0.27 per share. This amount is most directly comparable to the Company's
previously articulated second quarter FFO forecast of $0.20 to $0.24 per
share and compares to $10.6 million or $0.28 per share for the second
quarter of 2005. Taking into consideration these adjustments, the Company
is reporting FFO of $14.1 million or $0.25 per share for the second quarter
of 2006.
Same-store Results:
The 199 same-store facilities contain approximately 12.9 million net
rentable square feet, representing approximately 53.2% of the aggregate net
rentable square feet of our 383 owned facilities at June 30, 2006. These
same-store facilities represent approximately 59.5% of our property net
operating income for the quarter ended June 30, 2006.
The tenant receivable adjustment discussed above reduced same-store
revenues by approximately $750 thousand during the quarter. Prior to giving
effect to this adjustment, same-store revenue grew 4.3%, property operating
expenses grew 9.6%, and net operating income grew 1.6% as compared to the
same quarter of 2005. After giving effect to this adjustment, same-store
revenue grew 1.7% and net operating income declined 2.3% as compared to the
second quarter of 2005. Same-store average occupancy decreased to 82.4% for
the second quarter of 2006 as compared to 82.6% for the second quarter of
last year.
The same-store properties occupancy grew from 81.3% at the end of the first
quarter of the year to 83.1% at June 30, 2006 representing positive
absorption of approximately 231 thousand square feet. Operating expenses
for the second quarter of 2006 increased $77 thousand or 0.07% from the
first quarter of 2006 and prior to the tenant receivable adjustment
described above, revenues for the second quarter increased 3.5% over the
first quarter of 2006.
Chief Executive Officer and President Dean Jernigan commented, "We are
pleased with the progress we are making in our efforts to improve the
operating results of the Company. We have accomplished all of the immediate
objectives I outlined for you when I joined the Company approximately 100
days ago. We have assembled our senior management team and are on track to
have our CenterShift software implementation at our facilities to be
completed by the end of the third quarter. We are encouraged by the results
of our same-store assets since the first quarter of this year. The revenue
and occupancy improvements and the expense controls indicate to us that our
business plan is gaining traction."
Asset Acquisition Activity
During the second quarter of 2006 the Company completed the acquisition of
nine facilities with an aggregate of 785 thousand net rentable square feet,
for an aggregate cost of approximately $55.8 million including the
assumption of $14.0 million of debt. Subsequent to the end of the quarter
we acquired ten facilities with an aggregate of 727 thousand net rentable
square feet for an aggregate cost of approximately $48.4 million including
the assumption of approximately $9.4 million of debt. At August 7, 2006 we
are under contract to acquire eight additional facilities with an aggregate
of 558 thousand net rentable square feet for an aggregate cost of
approximately $41.0 million. The Company's unsecured credit facility was
used to fund the cash portion of the acquisitions and it is anticipated
that it will be used to fund the acquisitions under contract, although each
of these pending acquisitions is subject to significant contingencies and
there can be no assurance that the facilities will be acquired.
Earnings Outlook
The Company expects to incur severance and other costs as the
implementation of our business plan will create changes in management
structure and process. We anticipate that these costs will range from $2.6
to $2.8 million and will be incurred during the third quarter of 2006.
Prior to recognizing the costs described above associated with the
implementation of our business plan, the Company estimates that its fully
diluted FFO per share for the three months ended September 30, 2006 will be
between $0.24 and $0.26 and that its fully diluted loss per share will be
between $(0.04) and $(0.02). Including the impact of the above costs, the
Company estimates that its FFO per share will be between $0.19 and $0.22.
The Company's estimate is based on the following key assumptions:
-- Same Store revenue growth of 4.25% - 5.25% over the third quarter of
2005
-- The closing of the acquisitions outlined in this release utilizing our
unsecured credit facility
-- General and Administrative expenses of $4.7-$4.9 million
-- Increases in Libor of 25 basis points during the quarter
Chief Financial Officer Christopher Marr said, "We remain cautiously
optimistic in our financial outlook. We believe that our focus on people,
systems and accountability will result in continuous improvement in our
financial performance over the next several quarters."
Distributions
On April 24, 2006 the Board of Directors declared a quarterly distribution
of $0.29 per share, payable on July 24, 2006 to shareholders of record on
July 10, 2006.
Conference Call
Management will host a conference call at 11:00 a.m. EDT on Tuesday August
8, 2006
to discuss financial results for the three months ended June 30, 2006. A
live web cast 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 (800) 289-0572 for domestic
callers, and (913) 981-5543 for international callers. The reservation
number for both is 2439778. After the live webcast, the call will remain
available on
U-Store-It's website for one month. In addition, a telephonic replay of the
call will be available until August 13, 2006. The replay dial-in number is
(888) 203-1112 for domestic callers (719) 457-0820 for international
callers. The replay reservation number is 2439778. Supplemental operating
and financial data as of June 30, 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 estates 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.
Net operating income, which we refer to as "NOI," is defined 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, other depreciation and
general and administrative expense, and deducting from net income: income
from discontinued operations, gains on sale of self-storage facilities, and
interest income.
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 Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may
cause the actual results of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements, including without limitation: 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; 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
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
June 30, December 31,
(Dollars in thousands, except par value amount) 2006 2005
------------ ------------
ASSETS
Storage facilities-net $ 1,504,919 $ 1,246,295
Cash and cash equivalents 13,479 201,098
Restricted cash 15,396 14,672
Loan procurement costs - net of amortization 9,298 10,437
Other assets 8,087 8,986
------------ ------------
TOTAL ASSETS $ 1,551,179 $ 1,481,488
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Revolving credit facility $ 88,000 $ -
Loans payable 685,423 669,282
Accounts payable and accrued expenses 19,356 18,928
Distributions payable 16,658 16,624
Deferred revenue 10,235 8,857
Security deposits 670 685
------------ ------------
Total liabilities 820,342 714,376
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 60,759 64,108
SHAREHOLDERS' EQUITY
Common shares $.01 par value, 200,000,000
shares authorized, 57,206,517 and 57,010,162
shares issued and outstanding at June 30,
2006 and December 31, 2005, respectively 572 570
Additional paid in capital 797,543 795,244
Accumulated deficit (126,181) (91,253)
Unearned share grant compensation (1,856) (1,557)
------------ ------------
Total shareholders' equity 670,078 703,004
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,551,179 $ 1,481,488
============ ============
U-STORE-IT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
(Dollars and shares in thousands,
except per share data) 2006 2005 2006 2005
-------- -------- -------- --------
REVENUES:
Rental income $ 48,822 $ 31,480 $ 93,849 $ 59,077
Other property related income 3,618 2,304 6,719 4,422
-------- -------- -------- --------
Total revenues 52,440 33,784 100,568 63,499
OPERATING EXPENSES:
Property operating expenses 20,954 11,990 39,814 22,775
Property operating expenses -
related party 12 24 32 35
Depreciation 15,734 8,744 30,406 16,765
General and administrative 4,132 3,057 9,521 5,950
General and administrative -
related party 273 172 450 304
-------- -------- -------- --------
Total operating expenses 41,105 23,987 80,223 45,829
OPERATING INCOME 11,335 9,797 20,345 17,670
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans (10,977) (7,142) (20,977) (12,949)
Loan procurement amortization
expense (447) (385) (842) (758)
Write-off of loan procurement
cost due to early
extinguishment of debt - - (1,273) -
Interest income 159 23 1,043 57
Other (102) 7 (60) (43)
-------- -------- -------- --------
Total other expense (11,367) (7,497) (22,109) (13,693)
INCOME (LOSS) BEFORE MINORITY
INTERESTS (32) 2,300 (1,764) 3,977
MINORITY INTERESTS 2 (96) 147 (156)
-------- -------- -------- --------
NET INCOME (LOSS) $ (30) $ 2,204 $ (1,617) $ 3,821
======== ======== ======== ========
Basic earnings (loss) per share $ - $ 0.06 $ (0.03) $ 0.10
Diluted earnings (loss) per share $ - $ 0.06 $ (0.03) $ 0.10
Weighted-average basic shares
outstanding 57,325 37,478 57,286 37,478
Weighted-average diluted shares
outstanding 57,325 37,520 57,286 37,502
======== ======== ======== ========
Distributions declared per common
share $ 0.29 $ 0.28 $ 0.58 $ 0.56
======== ======== ======== ========
Same Store Facility Results (199 facilities)
Three months ended Six months ended
June 30, June 30,
(Dollars in ---------------------- ----------------------
thousands,
except for Percent Percent
square feet) 2006 2005 Change 2006 2005 Change
---------- ---------- ------ ---------- ---------- ----
Rental income $ 28,032 $ 27,630 $ 55,830 $ 54,182
Other
operating
income 1,293 1,214 2,552 2,541
---------- ---------- ---------- ----------
Total
revenues (a) 29,325 28,844 1.7% 58,382 56,723 2.9%
Property
operating
expenses
Property
taxes 3,337 3,185 4.8% 6,714 6,376 5.3%
Personnel
expense 3,041 2,890 5.2% 6,139 5,959 3.0%
Advertising 817 663 23.2% 1,416 1,194 18.6%
Repair and
maintenance 284 192 47.9% 586 369 58.8%
Utilities 1,042 968 7.6% 2,326 2,097 10.9%
Property
insurance 430 322 33.5% 745 651 14.4%
Other
expenses 1,651 1,454 13.5% 3,201 2,887 10.9%
---------- ---------- ---------- ----------
Total
property
operating
expenses 10,602 9,674 9.6% 21,127 19,533 8.2%
---------- ---------- ---------- ----------
Net Operating
Income (b)
(g) $ 18,723 $ 19,170 (2.3%) $ 37,255 $ 37,190 0.2%
========== ========== ========== ==========
Gross margin (a) 63.8% 66.5% 63.8% 65.6%
Period
average
occupancy (c) 82.4% 82.6% 81.9% 82.2%
Period end
occupancy (d) 83.1% 83.6% 83.1% 83.6%
Total net
rentable
square feet 12,890,822 12,890,822 12,890,822 12,890,822
Realized
annual rent
per occupied
square foot
(e) $ 10.56 $ 10.38 1.7% $ 10.58 $ 10.23 3.4%
In place
annual rent
per square
foot (f) $ 12.35 $ 11.62 6.3% $ 12.27 $ 11.57 6.1%
Reconciliation of Same Store Net Operating Income to Operating Income
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Same store
net
operating
income (g) $ 18,723 $ 19,170 $ 37,255 $ 37,190
Non same
store net
operating
income (g) 12,751 2,600 23,467 3,499
Depreciation (15,734) (8,744) (30,406) (16,765)
General and
administrative
expense (4,405) (3,229) (9,971) (6,254)
---------- ---------- ---------- ----------
Operating
income $ 11,335 $ 9,797 $ 20,345 $ 17,670
========== ========== ========== ==========
a - Total revenue reflects the $750 non-cash adjustment in 2006; prior to
the effect of this adjustment, revenue growth was 4.3% for the quarter
and 4.2% for the six month period. Gross margin was 66.4% and 65.1%
prior to the effect of this adjustment.
b - Net operating income reflects the $750 non-cash adjustment in 2006;
prior to the effect of this adjustment, NOI growth was 1.7% for the
quarter and 2.2% for the six-month period, respectively
c - Square foot occupancy represents the weighted average occupancy for the
period.
d - Represents occupancy at June 30.
e - Realized annual rent per occupied square foot is computed by dividing
rental income by the weighted average occupied square feet for the
period. Prior to the effect of the $750 non-cash adjustment, it was
$10.84 and $10.65 for the quarter and six-mont period, respectively.
f - In place annual rent per occupied square foot represents annualized
contractual rents per period end occupied square foot.
g - 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 a meaningful measure of operating performance, because we
utilize NOI in 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.
NON-GAAP FINANCIAL MEASURES - COMPUTATION OF
FUNDS FROM OPERATIONS ("FFO")
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
(Dollars and shares in thousands
except per share data) 2006 2005 2006 2005
-------- -------- -------- --------
Net income (loss) $ (30) $ 2,204 $ (1,617) $ 3,821
Plus:
Real Estate Depreciation 15,424 8,744 30,096 16,765
Minority Interest (2) 96 (147) 156
-------- -------- -------- --------
FFO - Operating partnership $ 15,392 $ 11,044 $ 28,332 $ 20,742
FFO - Allocable to minority
interest $ (1,282) $ (490) $ (2,363) $ (838)
-------- -------- -------- --------
FFO - Allocable common shareholders $ 14,110 $ 10,554 $ 25,969 $ 19,904
======== ======== ======== ========
Weighted-average diluted shares
outstanding (1) 57,399 37,520 57,403 37,502
Funds From Operations per share $ 0.25 $ 0.28 $ 0.45 $ 0.53
Reconciliation of Dilutive Income
per Share to Funds From Operations
per share:
Dilutive income per share $ - $ 0.06 $ (0.03) $ 0.10
Adjustments:
Real Estate Depreciation 0.27 0.24 0.52 0.45
Funds attributable to minority
shareholders (0.02) (0.02) (0.04) (0.02)
-------- -------- -------- --------
Funds from operations per share $ 0.25 $ 0.28 $ 0.45 $ 0.53
======== ======== ======== ========
(1) The weighted average number of shares for the period include
approximately 0.1 million shares related to certain equity awards
issued that are dilutive for FFO
Contact:
U-Store-It Trust
Christopher P. Marr
Chief Financial Officer
(440) 234-0700