SOURCE: U-Store-It

March 19, 2007 20:05 ET

U-Store-It Announces Filing of Its 2006 Form 10-K and 2006 Operating Results

CLEVELAND, OH -- (MARKET WIRE) -- March 19, 2007 --U-Store-It Trust (the "Company") (NYSE: YSI) today announced its operating results for the year and three months end December 31, 2006 and that on Friday, March 16, 2007 the Company filed its Form 10-K with the Securities and Exchange Commission.

2006 Form 10-K

On March 16, 2007, the Company filed its 2006 Annual Report on Form 10-K. As previously disclosed, in this filing the Company restated its Predecessor owners' equity at January 1, 2004 and the Company's December 31, 2005 and 2004 consolidated and combined financial statements and quarterly data for 2005 and the first three quarters of 2006. The restatement corrected certain errors that existed in our 2005 and prior financial statements related to cash and cash equivalents, marketable securities, restricted cash, distributions payable, rental revenues, workers compensation expense, loan procurement cost amortization and several other matters. The impact of these restatements on the Company's previously reported net income (loss) is as follows:

                                        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