SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1997
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
(IRS 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, 27,216,515 shares outstanding at May 14, 1997
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Storage USA, Inc.
Consolidated Statements of Operations
(unaudited)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------------------- --------------------------
Property Revenues:
Rental income $33,476 $20,819
Management income - 240
Other income 441 274
-------------------------- --------------------------
Total property revenues 33,917 21,333
-------------------------- --------------------------
Property Expenses:
Cost of property operations & maintenance 8,422 5,733
Taxes 2,972 1,693
General & administrative 1,267 780
Depreciation & amortization 4,174 2,670
-------------------------- --------------------------
Total property expenses 16,835 10,876
-------------------------- --------------------------
Income from property operations 17,082 10,457
-------------------------- --------------------------
Other income (expense):
Interest expense (3,269) (1,665)
Interest income 237 155
-------------------------- --------------------------
Income before minority interest 14,050 8,947
Minority interest (1,065) (555)
-------------------------- --------------------------
Net income $12,985 $8,392
-------------------------- --------------------------
Net income per share $0.52 $0.47
-------------------------- --------------------------
Weighted average shares outstanding 25,040 17,827
-------------------------- --------------------------
See notes to consolidated financial statements.
<PAGE>
Storage USA, Inc.
Consolidated Balance Sheets
(unaudited)
(Amounts in thousands, except share data)
<CAPTION>
as of as of
March 31, 1997 December 31, 1996
----------------------- ----------------------
Assets
Investments in storage facilities, at cost:
Land $247,948 $235,139
Buildings and equipment 650,845 620,503
----------------------- ----------------------
898,793 855,642
Accumulated depreciation (30,620) (26,573)
----------------------- ----------------------
868,173 829,069
Cash & cash equivalents 9,569 1,323
Other assets 15,264 14,853
----------------------- ----------------------
Total assets $893,006 $845,245
----------------------- ----------------------
Liabilities & shareholders' equity
Line of credit borrowings - $ 52,730
Mortgage notes payable $ 40,179 45,724
Notes payable 100,000 100,000
Accounts payable & accrued expenses 8,734 7,616
Dividends payable 16,322 -
Rents received in advance 5,939 5,640
Minority interest 59,457 58,407
----------------------- ----------------------
Total liabilities 230,631 270,117
----------------------- ----------------------
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, 150,000,000 shares
authorized, 27,204,802 and 24,723,027
shares issued and outstanding 272 247
Paid-in capital 701,315 610,793
Notes receivable - officers (10,216) (10,253)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (13,165) (9,828)
----------------------- ----------------------
Total shareholders' equity 662,375 575,128
----------------------- ----------------------
Total liabilities & shareholders' equity $893,006 $845,245
----------------------- ----------------------
See notes to consolidated financial statements.
<PAGE>
Storage USA, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in thousands)
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
---------------------- ----------------------
Operating Activities:
Net Income $12,985 $8,392
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,174 2,670
Minority interest 1,065 555
Changes in assets and liabilities:
Other assets (538) 1,348
Other liabilities 1,417 (2,052)
---------------------- ----------------------
Net cash provided by operating activities: 19,103 10,913
---------------------- ----------------------
Investing Activities:
Acquisition and improvement of storage facilities (37,275) (27,329)
Development of storage facilities (4,041) (930)
---------------------- ----------------------
Net cash used in investing activities (41,316) (28,259)
---------------------- ----------------------
Financing Activities:
Net repayments under line of credit (52,730) (43,440)
Mortgage principal payments (8,312) (58)
Mortgage principal borrowings 932 -
Proceeds from issuance of stock 90,584 60,919
Distribution to minority interests (15) (70)
---------------------- ----------------------
Net cash provided by financing activities 30,459 17,351
---------------------- ----------------------
Net increase in cash and equivalents 8,246 5
Cash and equivalents, beginning of period 1,323 3,006
---------------------- ----------------------
Cash and equivalents, end of period $9,569 $3,011
---------------------- ----------------------
Supplemental schedule of non-cash activities:
Common Stock issued in exchange for notes receivable - $1,253
Mortgages assumed on storage facilities acquired $1,835 -
Storage facilities acquired in exchange for Operating
Partnership Units - $1,538
---------------------- ----------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(thousands, except share and per share data)
1. Unaudited Interim Financial Statements
References to the Company include Storage USA, Inc. ("the REIT") and
SUSA Partnership, L.P. (the "Partnership"), its principal operating
subsidiary. Interim consolidated financial statements of 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 that 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
amended by Form 10-K/A, as filed with the Securities and Exchange
Commission.
2. Organization
Storage USA, Inc. (the "Predecessor"), 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
Predecessor completed an initial public offering (the "IPO") of
6,325,000 shares of common stock at $21.75 per share forming the REIT.
The REIT received approximately $125,790 in proceeds, net of
underwriting discount and offering expenses. Upon completion of the
IPO, the REIT contributed substantially all of its net assets to the
Partnership in exchange for an approximately 98.9% general partnership
interest in the Partnership. The REIT contributes the proceeds of
issuances of its equity securities to the Partnership in exchange for
additional units of partnership interest. The Partnership also issues,
from time to time, additional units of Partnership interest in the
acquisition of self-storage facilities. At March 31, 1997, the REIT
owned approximately 93% of the outstanding partnership interests in the
Partnership. As part of the IPO, the Partnership formed SUSA
Management, Inc. ("SUSA Management"), to provide self-storage
management to third parties and certain ancillary services. The
Partnership owns 99% of the economic interest of SUSA Management.
3. Capital Stock
Common Stock Offerings
On March 17, 1997, the REIT issued 1,400,000 shares of common stock to
the public for an aggregate purchase price of $50,739. On March 19,
1997, the underwriters exercised their option to purchase 210,000
additional shares of common stock for an aggregate purchase price of
$7,610. Security Capital US Realty ("US Realty")
1
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 1997
(thousands, except share and per share data)
purchased approximately 851,000 shares of common stock directly from
the REIT on March 28, 1997 through the exercise of its participation
right under the Strategic Alliance Agreement, dated March 19, 1996,
between the Company, US Realty and an affiliate of US Realty (the
"Strategic Alliance Agreement"). Under the Strategic Alliance
Agreement, US Realty has the right, subject to certain limitations,
to purchase directly from the Company that number of shares of
common stock necessary to preserve its percentage ownership of
the Company's outstanding common stock upon an offering of such
stock. US Realty currently owns approximately 37% of the outstanding
common stock of the REIT. Net proceeds from US Realty were $32,019.
The proceeds from the issuances were contributed to the Partnership in
exchange for additional Partnership Units. The Partnership used the net
proceeds to repay debt incurred under its revolving lines of credit to
finance the acquisition of self-storage facilities and for working
capital.
4. Investment in Storage Facilities
The following summarizes activity in storage facilities during the
period:
Cost:
Balance on January 1, 1997 $ 855,642
Property acquisitions 34,854
Existing facility expansions 1,086
Land acquisitions and
joint venture development 4,041
Improvements and other 3,170
----------
Balance on March 31, 1997 $ 898,793
==========
Accumulated depreciation:
Balance on January 1, 1997 $ 26,573
Additions during the period 4,047
----------
Balance on March 31, 1997 $ 30,620
==========
2
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 1997
(thousands, except share and per share data)
4. Investment in Storage Facilities, continued
The following pro forma combined results of operations of the Company
for the three months ended March 31, 1997 has been prepared assuming
that the acquisition of the 11 properties acquired during the same
three month period had been completed as of January 1, 1997.
Pro forma for
quarter ended
March 31, 1997
--------------
Revenues $ 34,922
Net Income $ 13,090
Earnings per share $ 0.52
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, 1997,
nor does it purport to represent the results of operations for future
periods.
5. Interest Rate Swap Agreement
In 1996, the Company entered into a $75,000 (notional amount) fixed pay
forward starting swap agreement with a major Wall Street investment
banking firm in order to reduce the interest rate risk associated with
the anticipated issuance of fixed rate debt by the Company in 1997. The
transaction allowed the Company to lock-in a seven-year Treasury rate
of 6.87% on or before May 31, 1997. The Company anticipates terminating
the swap transaction upon the issuance of the fixed rate debt. At March
31, 1997, the Company had a $803 unrealized gain on this transaction.
Any gain or loss from this transaction will be deferred and amortized
into interest expense over the term of the fixed rate debt. This
transaction exposes the Company to credit loss in the event of
non-performance by the counterparty, however such non-performance is
not anticipated because of the counterparty's high credit rating.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 1997
(thousands, except share and per share data)
6. Notes Payable and Mortgages Payable
The Company can borrow under a $75,000 line of credit with a group of
commercial banks and under a $30,000 line of credit with a commercial
bank. These lines of credit bear interest at various spreads over
LIBOR. During the quarter ended March 31, 1997, the weighted average
borrowings were $57,880, and the weighted average interest rate was
6.96%. At March 31, 1997 there were no amounts outstanding on the lines
of credit. At March 31, 1997 there were $30.8 million of fixed rate
mortgage notes payable and $9.4 million of variable rate mortgage notes
payable. As of March 31, 1997, the fixed rate mortgage notes carried
rates of interest ranging from 8.4% to 11.5% with a weighted average
rate of 10.4%. The variable rate mortgage notes carried rates of
interest ranging from 7.69% to 9.67% with a weighted average rate of
9.2%.
7. Other Income
Other income at March 31, 1997 and 1996 consists primarily of revenue
from the sale of locks and packaging supplies, truck rentals, and
ground rents for billboards and cellular towers. Effective January 1,
1997, the contracts to manage facilities for third parties between the
owners of these self-storage facilities and SUSA Management, a
consolidated subsidiary, were transferred to Storage USA Franchise
Corp., an unconsolidated entity being accounted for under the equity
method. As a result, the Company's proportionate share of management
income of approximately $183 is included in other income at March 31,
1997.
8. Recent Accounting Developments
In February of 1997, Statement of Financial Accounting Standards No.
128, "Earnings per Share" was issued. The statement establishes
standards for computing and presenting earnings per share and is
required to be adopted in the Company's financial statements for the
year ended December 31, 1997. The statement is not expected to have a
material impact on the Company's financial results.
9. Subsequent Events
From March 31, 1997 to May 14, 1997, the Company completed the
acquisition of 18 self-storage facilities for approximately $30
million. These acquisitions were financed through operating cash flows
and borrowings under the available line of credit. The Company has also
entered into various property acquisition contracts with an aggregate
cost of approximately $96 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
terminated, the costs incurred by the Company would be immaterial.
4
<PAGE>
ITEM 2. 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
include Storage USA, Inc. (the "REIT") and SUSA Partnership L.P., the operating
subsidiary (the "Partnership").
Due to the substantial number of facilities acquired from March 31, 1996 to
March 31, 1997, management believes that it is meaningful and relevant in
understanding the present and ongoing operations of the Company to compare
certain information using occupancy and per square foot information.
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 Costs 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, 1997 Compared to Quarter Ended
March 31, 1996.
In the first quarter of 1997, the Company reported growth in revenue, NOI and
net income, respectively, of $12.6 million, $8.6 million and $4.6 million over
the same quarter of 1996. Since March 31, 1996, the Company has acquired 87
facilities and placed 2 development properties in service. These 89 facilities
added 5.8 million square feet, bringing the total square feet of the 253
facilities owned by the Company at March 31, 1997 to 17 million. For the first
quarter of 1997, the 159 facilities owned during the entire first quarter of
1996 provided 65% of the Company's rental income. These same facilities' rental
income grew 5% over first quarter 1996 results. The majority of this growth was
provided by an approximate 7% rate increase, which was offset by discounts, the
timing of rate increases, and, to a lesser extent, occupancy. At March 31, 1997,
the physical and economic occupancy and rent per square foot of the 159
5
<PAGE>
comparable facilities owned at March 31, 1996, was 86%, 80%, and $10.00,
respectively, while the figures as of March 31, 1996, were 87%, 81%, and $9.39,
respectively. The Company's portfolio of facilities as a whole had an average
occupancy at March 31, 1997, of 85% physical and 78% economic, with an average
rent per square foot of $10.02.
Management contracts were transferred to Storage USA Franchise Corp., an
unconsolidated subsidiary, on January 1, 1997 and the Company's proportionate
share of the management fee revenue is included in other income at March 31,
1997. Management income for the quarter ended March 31, 1997 was $183, a $57
decrease over the same period in 1996. The decline was due to the
acquisition of 14 facilities that were managed by the Company during the
same period of 1996. Other income, exclusive of the proportionate share
of management income primarily reflects sales of lock and packaging products,
truck rentals, and equity investment in an unconsolidated subsidiary,
increased primarily due to the increase in the number of properties owned,
resulting in incremental growth in the revenue from these ancillary services,
and to a lesser extent, rental income on cellular tower and billboard leases.
Cost of property operations and maintenance was $8.4 million for the quarter
ended March 31, 1997, representing a $2.7 million increase over the first
quarter of 1996. Cost of property operations and maintenance was 25% of revenues
for the quarter ended March 31, 1997, which is a decrease from the 27% of
revenues for the quarter ended March 31, 1996. The decline in the common size
percentage is explained by same store revenue growth out-pacing the expense
growth combined with the revenue impact of over $34 million of first quarter
acquisitions. The Company will benefit in the first month or two following
acquisitions as the revenues precede the costs of implementing the Company's
management and operational strategy.
Tax expense increased from $1.7 million or 8% of revenues for the quarter ended
March 31, 1996, to $3.0 million or 9% of revenue for the quarter ended March 31,
1997. The majority of the growth as a percentage of revenues is attributable to
reassessments on the properties purchased during 1994 and 1995. The remainder is
due to increased state and franchise taxes as a result of the Company acquiring
self-storage facilities in additional states with higher tax rates.
General and administrative expense ("G&A") increased from $0.8 million to $1.3
million in the first quarter of 1997 over the comparable quarter of 1996. As a
percentage of revenues, this category of expense has remained constant at 4%.
The growth in this expense reflects the Company's expansion of its
administration, development and acquisition, management information systems and
human resource departments in connection with its ongoing growth strategy.
Depreciation expense increased to $4.2 million for the quarter ended March 31,
1997 from $2.7 million for the comparable period in 1996, reflecting the
6
<PAGE>
increase in the number of facilities owned. The Company has acquired or placed
in service approximately $260 million in depreciable assets since April 1, 1996.
Interest expense for the quarter ended March 31, 1997, was $3.3 million as
compared to $1.7 million for the comparable period in 1996. The 1997 first
quarter interest expense represents weighted average borrowings of $57.9 million
under the Company's lines of credit at a weighted average interest rate of 6.96%
and $100 million notes payable at an interest rate of 7.125%. In the first
quarter of 1996, the weighted average borrowings were $105.5 million at a
weighted average interest rate of 6.1%, and there were no notes payable
outstanding.
Interest income remained $0.2 million for the quarter ended March 31, 1997 as
compared to the quarter ended March 31, 1996. Interest income represents
earnings on overnight deposits and amounts outstanding under the 1995 Employee
Stock Purchase and Loan Plan.
Minority interest grew from $0.6 million for the quarter ended March 31, 1996 to
$1.1 million for the quarter ended March 31, 1997, as the Company issued
approximately 853,000 Partnership units in connection with the acquisition of
certain facilities from April 1, 1996 to March 31, 1997.
Liquidity and Capital Resources
Cash provided from operating activities grew to $19.1 million for the three
months ended March 31, 1997 from $10.9 million for the three months ended March
31, 1996. This increase is primarily a result of the Company's net income
growing $4.6 million or 55%, over the same three month period in the prior year,
primarily as a result of the increase in number of facilities owned and the
improvement of operations at the facilities acquired.
During the first three months of 1997, the Company acquired 11 facilities
totaling 657,984 square feet for an aggregate cost of $34.9 million, which
includes the assumption of a mortgage. The Company currently has plans to
develop 25 new facilities, primarily in the Washington, D.C., Memphis,
Tennessee, and San Francisco, California areas. Of these, 13 projects are under
construction or are in construction planning, with expected costs totaling $44.0
million and completion dates ranging from the second quarter of 1997 through the
first quarter of 1998. Expansions are planned for 22 existing facilities, and of
these, 17 are under way with planned completion dates ranging from the second
quarter of 1997 to the first quarter of 1998. Estimated costs of the 17
expansions under way are $13.4 million.
On February 19, 1997 the REIT and the Partnership filed a shelf registration
statement with the Securities and Exchange Commission relating to $450 million
of securities, including up to $250 million of common stock, preferred stock,
depository shares and warrants of the REIT and up to $200 million of unsecured,
7
<PAGE>
nonconvertible senior debt securities of the Partnership. An additional $150
million of unsecured, nonconvertible debt securities are issuable under the
Partnership's existing shelf registration statement.
In March 1997, the REIT issued 2,461,000 shares of common stock under the new
shelf registration statement for an aggregate purchase price of $90.4 million.
The proceeds from the issuance were contributed to the Partnership in exchange
for additional Partnership Units. The Partnership used the net proceeds to repay
debt incurred under its revolving lines of credit, to finance the acquisition of
self-storage facilities, and for working capital.
At March 31, 1997, the Company had no borrowings outstanding on its lines of
credit, $100 million of 7.125% senior unsecured notes payable, $30.8 million of
fixed rate mortgage notes payable, and $9.4 million of variable rate mortgage
notes payable. As of March 31, 1997, the fixed rate mortgage notes carried rates
of interest ranging from 8.4% to 11.5% with a weighted average rate of 10.4%.
The variable rate mortgage notes carried rates of interest ranging from 7.69% to
9.67% with a weighted average rate of 9.2%. The Company had $105 million of
unused borrowing capacity under its lines of credit at March 31, 1997.
The Company anticipates, subject to prevailing market conditions and other
business and economic factors, issuing preferred stock or debt securities
through the Partnership to finance its liquidity requirements for the remainder
of 1997. In anticipation of a debt offering, the Company entered into a forward
starting interest rate swap with a notional amount of $75 million, which had the
effect of fixing the seven year Treasury starting May 1, 1997 at 6.87%. At March
31, 1997, the company had an unrealized gain on this derivative instrument of
$.8 million.
As of March 31, 1997, there were approximately 1,898,000 outstanding Units owned
by third parties. Beginning one year after their issuance, 1,816,000 of these
Units are redeemable for cash equal to the market value of one share of Common
Stock at the time of redemption or, at the Company's option, one share of Common
Stock per Unit. The remaining 82,000 Units are redeemable for cash or, at the
Company's option, a two-year promissory note. Any shares of Common Stock issued
in redemption of Units are expected to be registered under the Securities Act of
1933, as amended, and to be freely tradeable.
From March 31, 1997 through May 14, 1997, the Company has completed the
acquisition of 18 self-storage facilities for approximately $30 million. 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 for
facilities with an aggregate cost of approximately $96 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 terminated, the costs incurred by the Company would be
immaterial.
The Company has incurred approximately $0.63 million for regularly scheduled
maintenance and repairs during the three months ended March 31, 1997. For the
8
<PAGE>
year, the Company expects to incur approximately $2.9 million for scheduled
maintenance and repairs and approximately $7.2 million to conform facilities
acquired during 1996, 1995 and 1994 to Company standards.
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. Because of the change in the definition of
FFO, FFO for the Company may not be comparable to similarly titled measures of
operating performance disclosed by other companies.
The following table illustrates the components of the Company's FFO for the
quarters ended March 31, 1997 and March 31, 1996.
Three months ended Three months ended
March 31, 1997 March 31, 1996
---------------------- ----------------------
Net Income $ 12,985 $ 8,392
Depreciation of real property 3,957 2,445
Amortization of lease guarantees 0 53
Amortization of non-compete 0 62
---------------------- ----------------------
Consolidated FFO 16,942 10,952
Minority interest share of
Depreciation and amortization (274) (141)
---------------------- ----------------------
FFO available to Company
shareholders $ 16,668 $ 10,811
====================== ======================
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. 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
9
<PAGE>
require the Company to utilize its bank lines of credit to finance property
acquisitions and development and major capital improvements. For the year ended
December 31, 1996, distributions were approximately 86% of the Company's FFO.
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.
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 rental increases that 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
quarters 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 February of 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" was issued. The statement establishes standards for
computing and presenting earnings per share and is required to be adopted in the
Company's financial statements for the year ended December 31, 1997. The
statement is not expected to have a material impact on the Company's financial
results.
10
<PAGE>
Part II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit 27 - Financial Data Schedule
11
<PAGE>
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 14, 1997
Storage USA, Inc.
By: /s/ Thomas E. Robinson
Thomas E. Robinson
President & Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited consolidated financial statements as of March 31, 1997,
and the three months then ended, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,569
<SECURITIES> 0
<RECEIVABLES> 15,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,833
<PP&E> 898,793
<DEPRECIATION> 30,620
<TOTAL-ASSETS> 893,006
<CURRENT-LIABILITIES> 90,452
<BONDS> 140,179
0
0
<COMMON> 272
<OTHER-SE> 662,103
<TOTAL-LIABILITY-AND-EQUITY> 893,006
<SALES> 33,476
<TOTAL-REVENUES> 33,917
<CGS> 0
<TOTAL-COSTS> 16,835
<OTHER-EXPENSES> 828
<LOSS-PROVISION> 0
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</TABLE>
