<PAGE> 1
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 quarter ended March 31, 1996
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: 001-12910
STORAGE USA, INC.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
62-1251239
(I.R.S. Employer
Identification Number)
10440 Little Patuxent Parkway, #1100, Columbia, MD
(Address of principal executive offices)
21044
(Zip Codes)
Registrant's telephone number, including area code: (410) 730-9500
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 the past 90 days. ( X) Yes ( ) NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 par value, 19,552,704 shares outstanding at May 15, 1996
<PAGE> 2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
STORAGE USA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
----------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
PROPERTY REVENUES:
Rental income $20,819 $11,921
Management income 240 244
Other income 274 147
----------------------------------------------------
Total property revenues 21,333 12,312
----------------------------------------------------
PROPERTY EXPENSES:
Cost of property operations & maintenance 5,733 3,290
Real estate taxes 1,693 806
----------------------------------------------------
Total property expenses 7,426 4,096
----------------------------------------------------
INCOME FROM PROPERTY OPERATIONS 13,907 8,216
OTHER INCOME (EXPENSE)
General & administrative (780) (512)
Depreciation & amortization (2,670) (1,569)
Interest expense (1,665) (157)
Interest income 155 15
----------------------------------------------------
INCOME BEFORE MINORITY INTEREST 8,947 5,993
Minority interest (555) (232)
----------------------------------------------------
NET INCOME $8,392 $5,761
====================================================
NET INCOME PER SHARE $0.47 $0.43
WEIGHTED AVERAGE SHARES OUTSTANDING 17,827 13,299
====================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
STORAGE USA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
as of as of
---------------------------------------------
March 31, 1996 December 31, 1995
(amounts in thousands)
(unaudited)
<S> <C> <C>
ASSETS
Investment in storage facilities, at cost:
Land $147,113 $139,603
Buildings and equipment 391,050 369,694
---------------------------------------------
538,163 509,297
Accumulated depreciation (17,031) (14,561)
---------------------------------------------
521,132 49,736
Cash & cash equivalents 3,011 3,006
Other assets 11,165 11,783
---------------------------------------------
TOTAL ASSETS $535,308 $509,525
==============================================
LIABILITIES & SHAREHOLDERS' EQUITY
Line of credit borrowings $64,165 $107,605
Mortgage notes payable 6,612 6,670
Accounts payable & accrued expenses 3,389 5,945
Dividends payable 10,149 -
Rents received in advance 4,184 3,680
Minority interest 29,461 27,438
---------------------------------------------
TOTAL LIABILITIES 117,960 151,338
---------------------------------------------
Commitments and contingencies
Shareholder's equity:
Common stock $.01 par value, 150,000,000 shares 195 176
authorized, 19,552,645 and 17,562,363 shares issued
and outstanding
Paid in capital 448,142 385,989
Notes receivable - officers (7,980) (6,727)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (7,178) (5,420)
---------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 417,348 358,187
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $535,308 $509,525
==============================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
STORAGE USA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
---------------------------------------------
(amounts in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $8,392 $5,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,670 1,569
Minority interest 555 232
Changes in assets and liabilities:
Other assets 1,348 (696)
Other liabilities (2,052) (989)
---------------------------------------------
Net cash provided by operating activities 10,913 5,877
---------------------------------------------
INVESTING ACTIVITIES:
Acquisition and improvements of storage facilities (27,329) (12,065)
Development of storage facilities (930) -
---------------------------------------------
Net cash used in investing activities (28,259) (12,065)
---------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit (43,440) 5,850
Mortgage principal payments (58) (11)
Proceeds from issuance of stock 60,919 -
Distributions to minority interests (70) (60)
---------------------------------------------
Net cash provided by financing activities 17,351 5,779
---------------------------------------------
Net increase (decrease) in cash and equivalents 5 (409)
Cash and equivalents, beginning of period 3,006 3,325
---------------------------------------------
Cash and equivalents, end of period $3,011 $2,916
=============================================
Supplemental schedule of non-cash activities:
Storage facilities acquired in exchange for Operating
Partnership Units $1,538 -
Common Stock issued in exchange for notes receivable $1,253 -
=============================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim consolidated financial statements of Storage USA, Inc. (the
"Company") are prepared pursuant to the requirements for reporting on
Form 10-Q. Accordingly, certain disclosures accompanying annual
financial statements prepared in accordance with generally accepted
accounting principles are omitted. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments,
necessary for the fair presentation of consolidated financial
statements for the interim periods have been included. The current
period's results of operations are not necessarily indicative of
results which ultimately may be achieved for the year. The interim
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes thereto included
in the Company's Form 10-K, as filed with the Securities and Exchange
Commission.
2. ORGANIZATION
Storage USA, Inc. (the Company), a Tennessee corporation, was formed
in 1985 to own, develop, construct and operate self-storage facilities
throughout the United States. On March 23, 1994, the Company
completed an initial public offering (the "IPO") of 6,325,000 shares
of common stock at $21.75 per share.
Upon completion of the IPO, the Company contributed substantially all
of its net assets to SUSA Partnership, L.P. (the "Operating
Partnership") in exchange for an approximately 98.9% general
partnership interest in the Operating Partnership. In addition, the
Operating Partnership formed SUSA Management, Inc., ("SUSA
Management") to provide self-storage management to third parties and
certain ancillary services. The Operating Partnership owns 99% of the
economic interest of SUSA Management.
3. CAPITAL STOCK
FORMATION OF STRATEGIC ALLIANCE
On March 1, 1996, the Company entered into a Stock Purchase Agreement
with Security Capital U.S.Realty (US Realty), an affiliate of Security
Capital Group. Under the Stock Purchase Agreement, subject to the
terms and conditions thereof, US Realty will invest a total of
$220,000 in the Company, initially place two of its nominees on the
Company's Board of Directors, one of whom the Company has been
informed will be William D. Sanders, Chairman of the Board and Chief
Executive Officer of Security Capital Group, and make available to the
Company certain strategic advice, research and related information and
expertise (the "Strategic Alliance"). As part of the transaction, on
March 19, 1996, the Company issued to US Realty 1,948,882 shares of
Common Stock, approximately 10.0% of the outstanding Common Stock, at
a price of $31.30 per share, plus a purchase price
1
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. CAPITAL STOCK (CONTINUED)
adjustment for accrued dividends, less issuance costs. At the same
time, the Company executed a Strategic Alliance Agreement and a
Registration Rights Agreement with US Realty.
After the Strategic Alliance has been approved by the shareholders of
the Company, and prior to December 31, 1996, the Company will issue to
US Realty an additional 5,079,872 shares of the Company's common stock
at the same price for an aggregate of $159,000. After acquiring the
additional shares (and assuming no other change in the number of
outstanding shares) US Realty will own approximately 28.6% of the
outstanding Common Stock. The proceeds of both fundings will be
contributed to the Operating Partnership in exchange for additional
Operating Partnership Units and used to support the acquisition and
development of self-storage facilities.
The Company has agreed to submit to the shareholders a proposal to
amend the ownership limitations of the Company's Charter to permit US
Realty to acquire up to 37.5% of the Company's capital stock. The
Strategic Alliance, the amendment and certain related transactions
have been submitted to shareholders for approval at the Company's 1995
annual meeting to be held June 5, 1996.
EMPLOYEE STOCK PURCHASE AND LOAN PLAN
In March of 1996, the Company issued 40,000 shares of its common stock
under the 1995 Employee Stock Purchase and Loan Plan. Pursuant to the
terms of the plan, the Company and certain officers entered into stock
purchase agreements whereby the officers purchased common stock at the
then current stock price. The Company provides 100% financing for the
purchase of the shares with interest at 7% per anum payable quarterly.
The underlying notes are secured by the shares and mature in November
2002. At March 31, 1996, there are 270,000 shares outstanding under
the plan.
2
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the
period:
<TABLE>
<S> <C>
COST:
Balance on January 1, 1996 $509,297
Property acquisitions 24,578
Land acquisitions 2,200
Improvements 2,088
----------------
Balance at March 31, 1996 $538,163
================
ACCUMULATED DEPRECIATION:
Balance at January 1, 1996 $14,561
Additions during the period 2,470
----------------
Balance at March 31, 1996 $17,031
================
</TABLE>
Unaudited pro forma combined results of operations of the Company for
three months ended March 31, 1996 are presented below. Such pro
forma presentation has been prepared assuming that the acquisition of
the 6 properties acquired during the quarter had been completed as of
January 1, 1996.
<TABLE>
<CAPTION>
PRO FORMA FOR
QUARTER ENDED
MARCH 31, 1996
--------------
<S> <C>
Revenues $ 22,224
Net income $ 8,777
Earnings per share $ 0.49
</TABLE>
The unaudited pro forma information is not necessarily indicative of
what actual results of operations of the Company would have been
assuming such transactions had been completed as of January 1, 1996,
nor does it purport to represent the results of operations
for future periods.
3
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. LINE OF CREDIT BORROWINGS
Line of credit borrowings at March 31, 1996 consists of $64,165 of
borrowings under a $75,000 line of credit with a group of commercial
banks. This line bears interest at various spreads over a base rate
based on the Company's debt service coverage. During the first
quarter of 1996, the weighted average borrowing was $105,540, and the
weighted average interest rate was 6.1%. The Company also has a line
of credit with a commercial bank which bears interest at Prime or
LIBOR plus 2.25%. During the quarter, the commercial bank agreed to
release the mortgages collateralizing the line and increase the amount
available under the line from $23 million to $30 million, with an
initial maturity of July 1, 1996.
6. INTEREST RATE SWAP AGREEMENT
In anticipation of a debt offering in 1996, the Company entered into
an interest rate swap agreement in October 1995, with the objective of
reducing its exposure to future interest rate fluctuations. The
agreement involved the exchange of a variable rate for a fixed rate
interest payment obligation. On March 8, 1996, the Company closed
the interest rate swap agreement and received proceeds of
approximately $50. The Company and its operating partnership, SUSA
Partnership L.P., filed a $250,000 debt shelf registration statement
on Form S-3 with the Securities and Exchange Commission on April 10,
1996. Upon successful completion of an offering of unsecured debt
securities under the shelf, the Company will recognize the gain as a
yield adjustment over the life of the debt.
7. COMMITMENTS AND CONTINGENCIES
PROPERTY DEVELOPMENT
The Company has entered into an agreement to develop a self-storage
facility in Northern Virginia. The facility will be owned by the
Company and an unaffiliated third party. Under the terms of the
agreement the Company is required to fund the cost of construction,
which is currently estimated to be approximately $6,500. As of March
31, 1996, the Company has incurred costs of approximately $4,183. The
facility is expected to be complete by the second quarter of 1996.
4
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8. SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Company has completed the
acquisition of five self-storage facilities for approximately $16,000.
These acquisitions were financed through operating cash flows and
borrowings under the available line of credit. The Company has
entered into various property acquisition contracts with an aggregate
cost of approximately $55,800. These acquisitions are subject to
customary conditions to closing including satisfactory due diligence
and should close during the second quarter. Should these contracts be
disapproved, the costs incurred by the Company would be immaterial.
5
<PAGE> 10
PART II- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits - None
b. Reports on Form 8-K
None filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 15, 1996
Storage USA, Inc.
By: /s/ JOHN R. ERICKSON
--------------------------------
John R. Erickson
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting
Officer)
6
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial condition
and results of operations of the Company should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. References to the Company
includes SUSA Partnership L.P., the Company's operating subsidiary (the
"Operating Partnership").
Due to the substantial number of facilities acquired from March 31, 1995 to
March 31, 1996, management believes that it is meaningful and relevant in
understanding the present and ongoing operations of the Company to compare
certain information using occupancy, per square foot and pro forma data.
The following are definitions of terms used throughout this discussion in
analyzing the Company's business. Physical Occupancy is defined as the total
net rentable square feet rented as of the date computed divided by the total
net rentable square feet available. Gross Potential Income is defined as the
sum of all units available to rent at a facility multiplied by the market
rental rate applicable to those units as of the date computed. Expected Income
is defined as the sum of the monthly rent being charged for the rented units at
a facility as of the date computed. Economic Occupancy is defined as the
Expected Income divided by the Gross Potential Income. Rent Per Square Foot is
defined as the annualized result of dividing Gross Potential Income on the date
computed by total net rentable square feet available. Direct Property
Operating Cost is defined as the costs incurred in the operation of a
facility, such as utilities, real estate taxes, and on-site personnel.
Indirect Property Operations Cost is defined as costs incurred in the
management of all facilities, such as accounting personnel and management
level operations personnel. Net Operating Income ("NOI") is defined as total
property revenues less Direct Property Operating Costs.
RESULTS OF OPERATIONS- QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED
MARCH 31, 1995.
In the first quarter of 1996, the Company reported growth in revenue, income
from property operations and net income, respectively, of $9.0 million, $5.7
million and $2.6 million over the same quarter of 1995. Since March 31, 1995,
the Company has acquired 67 facilities and completed construction of, and
opened, one new facility. These 68 facilities added 47,620
7
<PAGE> 12
units, or 4.7 million square feet, bringing the total square feet and units of
the 166 facilities owned by the Company at March 31, 1996 to 11.1 million
square feet and 110,010 units, respectively. For the first quarter of 1996,
the 98 facilities owned during the first quarter of 1995 provided 59% of the
Company's rental income. These same facilities' rental income grew 7.2% over
1995 results. Most of this growth was provided by rate increases. At March
31, 1996, the physical and economic occupancy and rent per square foot on these
facilities were 88%, 81%, and $9.61, respectively, while the figures for the
same period ended in 1995 were 87%, 79%, and $8.93, respectively. The
Company's portfolio as a whole had average occupancy at March 31, 1996 of 88%
physical and 81% economic, with an average rent per square foot of $9.40.
Management income for the quarter ended March 31, 1996 remained relatively
consistent with 1995. Other income, which reflects primarily sales of lock and
packaging products and truck rentals, increased primarily due to the increase
in the number of properties owned.
Cost of property operations and maintenance was $5.7 million for the quarter
ended March 31, 1996, representing a $2.4 million increase over the first
quarter of 1995. Cost of property operations and maintenance was 27% of
revenues for both the quarter ended March 31, 1996 and for the quarter ended
March 31, 1995.
Real estate tax expense increased from $.8 million or 6.5 % of revenues for the
quarter ended March 31, 1995 to $1.7 million or 7.9% of revenue for the quarter
ended March 31, 1996. This growth as a percentage of revenue reflects the
impact of reassessments on the properties purchased during 1994 and 1995. The
majority of the increase is attributable to reassessments on acquisitions with
the remainder attributable to increased tax rates or reassessments on
properties owned for a full year. The Company expects real estate tax expense
as a percentage of revenues for the remainder of 1996 to remain consistent with
the first quarter.
General and administrative expense increased $0.3 million to $0.8 million for
the first quarter of 1996 from the comparable quarter of 1995. As a percentage
of revenues the expense fell from 4.2% for the quarter ended March 31, 1995 to
3.6% for the quarter ended March 31, 1996. The Company expects that the
expense will decline further as a percentage of revenue in 1996, while the
gross expense will grow as the Company expands its accounting, management
information systems, and human resource departments, in connection with its
ongoing growth strategy.
Depreciation expense increased to $2.7 million for the quarter ended March 31,
1996 from $1.6 million for the comparable period in 1995, reflecting the
increase in the number of
8
<PAGE> 13
facilities owned. The Company has acquired approximately $179 million in
depreciable assets since April 1, 1995.
Interest expense for the quarter ended March 31, 1996 was $1.7 million as
compared to $0.2 million for the comparable period in 1995. 1996 interest
expense represents weighted average borrowings of $105 million under the
Company's lines of credit at a weighted average interest rate of 6.1%.
Interest income was $0.15 million for the quarter ended March 31, 1996 as
compared to $0.01 million for the quarter ended March 31, 1995. 1996 interest
income represents earnings on overnight deposits and amounts outstanding under
the 1995 Employee Stock Purchase and Loan Plan.
Minority interest grew from $.2 million for the quarter ended March 31, 1995 to
$.55 million for the quarter ended March 31, 1996 as the Company issued
approximately 645,000 operating partnership units in connection with the
acquisition of certain facilities from April 1, 1995 to March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations grew to $10.9 million for the three months ended
March 31, 1996 from $5.9 million for the three months ended March 31, 1995.
This increase is a result of the Company's net income growing $2.6 million or
45%, over the prior quarter, primarily as a result of the increase in number of
facilities owned, and the improvement of operations at the facilities acquired.
The Company's first quarter investing activities consisted of six facility
acquisitions for approximately $22 million. In addition, the Company acquired
three parcels of land for $2.2 million to permit expansion of two facilities
and the construction of a new self-storage facility. Three new property
constructions are underway at an estimated cost of $11 million. Completion
dates range from the second quarter of 1996 through 1997. A total of 15
expansion projects are in process with an estimated cost of $12 to $13 million
with openings scheduled for late 1996 into 1997. The Company currently plans
to the develop 11 new facilities primarily in the Washington, D.C. and Memphis,
TN metropolitan areas. The Company expects that the cost of the land, the
facility construction costs and the soft costs, such as capitalized interest,
will total approximately $42 million. These contracts are subject to zoning
approvals and other contingencies, and assuming successful completion of the
9
<PAGE> 14
development and construction process, the properties are expected to open
during 1997 and 1998.
On March 1, 1996, the Company entered into a Stock Purchase Agreement with
Security Capital U.S. Realty ("US Realty"), an affiliate of Security Capital
Group. Under the Stock Purchase Agreement, and pursuant to the terms and
conditions thereof, US Realty will invest a total of $220 million in the
Company, initially place two of its nominees on the Company's Board of
Directors, one of whom the Company has been informed will be William D.
Sanders, Chairman of the Board and Chief Executive Officer of Security Capital
Group, and make available to the Company certain strategic advice, research and
related information and expertise (the "Strategic Alliance"). As part of the
transaction, on March 19, 1996, the Company issued to US Realty 1,948,882
shares of Common Stock, approximately 10.0% of the outstanding Common Stock, at
a price of $31.30 per share, plus a purchase price adjustment for accrued
dividends. At the same time, the Company executed a Strategic Alliance
Agreement and a Registration Rights Agreement with US Realty. The Company used
the proceeds of the offering to pay off $43.4 million of borrowings under the
available lines of credit, for property acquisitions, and for working capital.
At March 31, 1996, the Company had $64.2 million of borrowings outstanding on
its line of credit, $3.4 million of fixed rate debt maturing in 2001, $2.3
million of fixed rate debt maturing in 2006, and $0.9 million of fixed rate
debt maturing in 2000. The Company had $40.8 million of unused borrowing
capacity under its lines of credit at March 31, 1996.
During the quarter, the Company issued approximately 48,000 units of limited
partnership interest in the Operating Partnership ("Units") valued at
approximately $1.5 million in connection with the acquisition of facilities.
The Company's acquisition of self-storage facilities using Units as
consideration may partially defer the seller's tax liability.
The Company has entered into various property acquisition contracts for
facilities with an aggregate cost of approximately $55.8 million. These
acquisitions are subject to customary conditions to closing including
satisfactory due diligence and should close during the second quarter. Should
these contracts be disapproved, the costs incurred by the Company would be
immaterial.
On April 10, 1996, the Operating Partnership filed a shelf registration
statement relating to $250 million of unsecured non-convertible senior debt
securities, which should enable the Company to access the public debt markets
efficiently at opportune times.
10
<PAGE> 15
FUNDS FROM OPERATIONS ("FFO")
The Company believes that FFO should be considered in conjunction with its net
income and cash flows to facilitate a clear understanding of its results of
operations. FFO is defined as net income, computed in accordance with GAAP,
excluding gains (losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO should not be considered an alternative to
net income as a measure of the Company's performance or to cash flows as a
measure of liquidity.
Effective January 1, 1996, the National Association of Real Estate Investment
Trusts amended its definition of FFO. The impact of conforming to the amended
definition was to reduce FFO available to the Company's stockholders by
approximately $104,000 and $50,000 for the three months ended March 31, 1996
and March 31, 1995, respectively. The following table quantifies the impact on
a per share basis for 1995.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C>
FFO per share under the previously effective $0.55 $0.59 $0.62 $0.62 $2.39
definition
Adjustment for depreciation of non real estate
items and loan fee amortization $(0.01) $(0.01) $(0.02) $(0.02) $(0.06)
-----------------------------------------------------------
FFO per share under the amended definition
published by NAREIT $0.54 $0.58 $0.60 $0.60 $2.33
===========================================================
</TABLE>
11
<PAGE> 16
The following table illustrates the components of the Company's FFO and FFO per
share for the quarters ended March 31, 1996 and March 31, 1995.
<TABLE>
<CAPTION>
Three Months Three Months
March 31, 1996 March 31, 1995
----------------------------------------
<S> <C> <C>
Net Income $8,392 $5,761
Depreciation of real property 2,445 1,234
Amortization of lease guarantees 53 192
Amortization of non-compete 62 63
----------------------------------------
Consolidated FFO $10,952 $7,250
----------------------------------------
Minority interest share of
Depreciation and amortization (141) (15)
----------------------------------------
FFO available to Company
shareholders $10,811 $7,235
========================================
FFO per share $0.61 $0.54
========================================
</TABLE>
The Company, in order to qualify as a REIT, is required to distribute a
substantial portion of its net income as dividends to its shareholders. For the
year ended December 31, 1995, those distributions were approximately 85% of the
Company's FFO. While the Company's goal is to generate and retain sufficient
cash flow to meet its operating, capital, and debt service needs, its dividend
requirements may require the Company to utilize its bank lines of credit to
finance property acquisitions and development and major capital improvements.
The Company has incurred approximately $0.2 million for regularly scheduled
maintenance and repairs during the three months ended March 31, 1996. For the
year, the Company expects to incur approximately $1.2 million for scheduled
maintenance and repairs and approximately $5.9 million to conform facilities
acquired during 1995 and 1994 to Company standards.
The Company believes that its liquidity and capital resources are adequate to
meet its cash requirements relating to its existing operations for the next
twelve months.
12
<PAGE> 17
INFLATION
The Company does not believe that inflation has had or will have a direct
effect on its operations. Substantially all of the leases at the facilities
allow for monthly increases which provide the Company with the opportunity to
achieve increases in rental income as each lease matures.
SEASONALITY
The Company's revenues typically have been higher in the third and fourth
quarter primarily because the Company increases its rental rates on most of its
storage units at the beginning of May, and to a lesser extent because
self-storage facilities tend to experience greater occupancy during the late
spring and early fall months due to the greater incidence of residential moves
during those periods. The Company believes that its tenant mix, rental
structure, and expense structure provide adequate protection against undue
fluctuations in cash flows and net revenues during off-peak seasons. Thus, the
Company does not expect seasonality to materially affect distributions to
shareholders.
RECENT ACCOUNTING DEVELOPMENTS
In October of 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123") was issued. The standard
is effective for fiscal years beginning after December 15, 1995. The Company
has elected to continue expense recognition under APB 25, and disclosing pro
forma net income, and earnings per share information based on the FAS 123 fair
value methodology.
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,011
<SECURITIES> 0
<RECEIVABLES> 11,165
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,176
<PP&E> 538,163
<DEPRECIATION> 17,031
<TOTAL-ASSETS> 535,308
<CURRENT-LIABILITIES> 47,183
<BONDS> 70,777
0
0
<COMMON> 195
<OTHER-SE> 417,153
<TOTAL-LIABILITY-AND-EQUITY> 535,308
<SALES> 20,819
<TOTAL-REVENUES> 21,333
<CGS> 0
<TOTAL-COSTS> 7,426
<OTHER-EXPENSES> 3,850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,665
<INCOME-PRETAX> 8,392
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,392
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
