FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number: 1-13820
SOVRAN SELF STORAGE, INC.
(Exact name of Registrant as specified in its charter)
Maryland |
| 16-1194043 |
(State or other jurisdiction of |
| (I.R.S. Employer |
6467 Main Street
Buffalo, NY 14221
(Address of principal executive offices) (Zip code)
(716) 633-1850
(Registrant's telephone number including area code)
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. Yes X No ____
As of November 10, 2000 there were outstanding 11,990,154 shares of the registrants' Common Stock, $.01 par value
PART I. | FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
SOVRAN SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
| September 30, |
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ASSESTS |
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Investment in storage facilities: |
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Land | $ 113,893 | $ 111,833 | ||
Building and equipment | 459,609 | 444,640 | ||
| 573,502 | 556,473 | ||
Less: accumulated depreciation | (43,120) | (33,453) | ||
Investments in storage facilities, net | 530,382 | 523,020 | ||
Cash and cash equivalents | 3,367 | 1,032 | ||
Accounts receivable | 3,460 | 1,796 | ||
Prepaid expenses and other assets | 5,043 | 3,871 | ||
Total Assets | $ 542,252 | $ 529,719 | ||
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LIABILITIES |
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Line of credit | $ 146,500 | $ 123,000 | ||
Term note | 75,000 | 75,000 | ||
Accounts payable and accrued liabilities | 5,349 | 4,696 | ||
Deferred revenue | 3,250 | 3,322 | ||
Accrued dividends | 6,954 | 7,010 | ||
Mortgage payable | 5,214 | 5,253 | ||
Total Liabilities | 242,267 | 218,281 | ||
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Minority interest | 23,379 | 23,582 | ||
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SHAREHOLDERS' EQUITY |
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Series A Junior Participating Cumulative Preferred |
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9.85% Series B Cumulative Preferred Stock, $.01 par |
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Common stock $.01 par value, 100,000,000 shares |
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Additional paid-in capital | 282,995 | 281,284 | ||
Unearned restricted stock | (595) | (339) | ||
Dividends in excess of net income | (18,279) | (13,357) | ||
Treasury stock at cost, 772,700 shares |
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Total Shareholders' Equity | 276,606 | 287,856 | ||
Total Liabilities and Shareholders' Equity | $ 542,252 | $ 529,719 | ||
See notes to financial statements.
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| July 1, 2000 | July 1, 1999 | ||
REVENUES: |
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Rental income | $ 23,097 | $ 21,535 | ||
Interest and other income | 389 | 1,035 | ||
Total revenues | 23,486 | 22,570 | ||
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EXPENSES: |
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Property operations and maintenance | 5,295 | 4,309 | ||
Real estate taxes | 2,096 | 1,901 | ||
General and administrative | 1,403 | 1,318 | ||
Interest | 4,482 | 3,503 | ||
Depreciation and amortization | 3,578 | 3,362 | ||
Total expenses | 16,854 | 14,393 | ||
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Income before minority interest | 6,632 | 8,177 | ||
Minority interest | (435) | (523) | ||
Net Income | 6,197 | 7,654 | ||
Series B preferred stock dividend | (739) | (501) | ||
Net income available to common shareholders | $ 5,458 | $ 7,153 | ||
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PER COMMON SHARE: |
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Earnings per common share - basic | $ 0.46 | $ 0.57 | ||
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Earnings per common share - diluted | $ 0.46 | $ 0.57 | ||
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Common shares used in basic earnings |
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Common shares used in diluted earnings |
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Dividends declared per common shares | $ 0.58 | $ 0.57 | ||
See notes to financial statements.
SOVRAN SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| January 1, 2000 | January 1, 1999 | ||
REVENUES: |
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Rental income | $ 66,558 | $ 61,108 | ||
Interest and other income | 1,015 | 1,519 | ||
Total revenues | 67,573 | 62,627 | ||
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EXPENSES: |
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Property operations and maintenance | 14,628 | 12,385 | ||
Real estate taxes | 6,112 | 5,196 | ||
General and administrative | 4,341 | 3,833 | ||
Interest | 12,673 | 10,476 | ||
Depreciation and amortization | 10,559 | 9,703 | ||
Total expenses | 48,313 | 41,593 | ||
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Income before minority interest | 19,260 | 21,034 | ||
Minority interest | (1,265) | (1,352) | ||
Net Income | 17,995 | 19,682 | ||
Series B preferred stock dividend | (2,216) | (501) | ||
Net income available to common shareholders | $ 15,779 | $ 19,181 | ||
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PER COMMON SHARE: |
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Earnings per common share - basic | $ 1.31 | $ 1.54 | ||
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Earnings per common share - diluted | $ 1.31 | $ 1.54 | ||
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Common shares used in basic earnings per share |
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Common shares used in diluted earnings per share |
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Dividends declared per common share | $ 1.72 | $ 1.69 | ||
See notes to financial statements
SOVRAN SELF STORAGE, INC.
STATEMENT OF CASH FLOW
(unaudited)
| January 1, 2000 | January 1, 1999 | ||
OPERATING ACTIVITIES |
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Net income | $ 17,995 | $ 19,682 | ||
Adjustments to reconcile net income to net cash |
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Depreciation and amortization | 10,559 | 9,703 | ||
Minority interest | 1,265 | 1,352 | ||
Restricted stock earned | 92 | 75 | ||
Changes in assets and liabilities: |
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Accounts receivable | (1,664) | 16 | ||
Prepaid expenses and other assets | (1,606) | (748) | ||
Accounts payable and other liabilities | 615 | 3,314 | ||
Deferred revenue | (141) | (6) | ||
Net cash provided by operating activities | 27,115 | 33,388 | ||
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INVESTING ACTIVITIES |
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Additions to storage facilities | (17,181) | (46,770) | ||
Additions to other assets | (200) | (172) | ||
Net cash used in investing activities | (17,381) | (46,942) | ||
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FINANCING ACTIVITIES |
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Net proceeds from issuance of common stock through Dividend Reinvestment and Stock |
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Net proceeds from issuance of preferred stock | - | 28,753 | ||
Proceeds from line of credit draw down | 23,500 | 2,000 | ||
Dividends paid-common stock | (20,757) | (20,794) | ||
Dividends paid-preferred stock | (2,216) | (501) | ||
Purchase of treasury stock | (7,784) | (1,924) | ||
Minority interest distributions | (1,467) | (1,452) | ||
Redemption of operating partnership units | - | (261) | ||
Mortgage principal payments | (39) | (9) | ||
Net cash (used in) provided by financing activities | (7,399) | 11,644 | ||
Net increase (decrease) in cash | 2,335 | (1,910) | ||
Cash at beginning of period | 1,032 | 2,984 | ||
Cash at end of period | $ 3,367 | $ 1,074 | ||
Supplemental cash flow information |
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See notes to financial statements.
SOVRAN SELF STORAGE, INC.
STATEMENTS OF CASH FLOW
Supplemental cash-flow information for the nine-months ended September 30, 2000
(dollars in thousands)
_______________________________________________________________________
Fair value of net liabilities assumed on the |
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Dividends declared but unpaid were $6,954 at September 30, 2000 and $7,010 at December 31, 1999.
See notes to financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. | BASIS OF PRESENTATION |
The accompanying unaudited financial statements of Sovran Self Storage, Inc. (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000 .
2. | ORGANIZATION |
The Company, a self-administered and self-managed real estate investment trust (a REIT), was formed on April 19, 1995 to own and operate self-storage facilities throughout the United States. On June 26, 1995, the Company commenced operations effective with the completion of its initial public offering of 5,890,000 shares (the Offering). Since its formation the Company has purchased a total of 153, (Four in 2000, eighteen in 1999, fifty in 1998, forty four in 1997, twenty-nine in 1996 and eight in 1995) self storage properties from unaffiliated third parties, increasing the total number of self-storage properties owned at September 30, 2000 to 226 properties in 21 states.
All of the Company's assets are owned by, and all its operations are conducted through, Sovran Acquisition Limited Partnership (the Operating Partnership). Sovran Holdings, Inc., a wholly owned subsidiary of the Company (the Subsidiary), is the sole general partner; and the Company is a limited partner of the Operating Partnership, and thereby controls the operations of the Operating Partnership holding a 93.36% ownership interest therein as of September 30, 2000. The remaining ownership interests in the Operating Partnership are held by certain former owners of assets acquired by the Operating Partnership subsequent to its formation. The consolidated financial statements of the Company include the accounts of the Company, the Partnership, and the wholly owned Subsidiary. All intercompany transactions and balances have been eliminated.
3. | INVESTMENT IN STORAGE FACILITIES |
The following summarizes activity in storage facilities during the period ended September 30, 2000.
(dollars in thousands)
Cost: |
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Beginning balance | $ 556,473 |
Property acquisitions | 9,690 |
Improvements and equipment additions | 7,698 |
Dispositions | (359) |
Ending balance | $ 573,502 |
Accumulated Depreciation: |
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Beginning balance | $ 33,453 |
Additions during the period | 9,903 |
Dispositions | (236) |
Ending balance | $ 43,120 |
4. | UNSECURED LINE OF CREDIT AND TERM NOTE |
At September 30, 2000, the Company had a $150 million unsecured credit facility, of which $146.5 million was drawn. The facility was scheduled to mature February 2001 and had an interest at LIBOR plus 1.25%.
In addition to the credit facility, the Company had an unsecured term note due December 2000, bearing interest at LIBOR plus 1.50%.
On November 7, 2000, the Company negotiated and funded a new unsecured debt package with a syndicate of banks. The new agreement provides for a $150 million revolving line of credit maturing November 2003 at LIBOR plus 1.37%, a $75 million term note through November 2003 (extendable to 2005 at the Company's option) at LIBOR plus 1.75%, and a $30 million term loan through November 2001 at LIBOR plus 1.37%.
The Company has interest rate cap transactions. Under one of the agreements, which is based on a notional amount of $40 million, if the LIBOR rate exceeds 9%, the bank pays the Company the rate in excess of 9% multiplied by $40 million for the outstanding period. The other agreement, which is based on a notional amount of $70 million, if the LIBOR rate exceeds 8.25%, the bank pays the Company the rate in excess of 8.25% multiplied by $40 million for the outstanding period.
The net carrying amount of the Company's debt instruments approximates fair value.
5. | COMMITMENTS AND CONTINGENCIES |
The Company's current practice is to conduct environmental investigations in connection with property acquisitions. At this time, the Company is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Company's overall business, financial condition, or results of operations.
As of September 30, 2000, the Company had entered into a contract for the purchase of one facility with an expected cost of $1.3 million.
6. | PRO FORMA FINANCIAL INFORMATION |
The following unaudited pro forma Condensed Statement of Operations is presented as if the 4 storage facilities purchased during the nine months ended September 30, 2000, had occurred at January 1, 2000. Such unaudited pro forma information is based upon the historical combined statements of operations of the Company. It should be read in conjunction with the financial statements of the Company and notes thereto included elsewhere herein. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited pro forma statement does not purport to represent what the actual results of operations of the Company would have been assuming such transactions had been completed as set forth above nor does it purport to represent the results of operations for future periods.
(in thousands, except per share) |
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| Nine Months Ended |
REVENUES: |
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Rental income | $ 66,844 |
Other income | 1,029 |
Total revenues | 67,873 |
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EXPENSES: |
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Property operations & maintenance | 14,714 |
Real estate taxes | 6,135 |
General and administrative | 4,343 |
Interest | 12,782 |
Depreciation and amortization | 10,593 |
Total expenses | 48,567 |
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Income before minority interest | 19,306 |
Minority interest | (1,268) |
Net income | 18,038 |
Series B preferred stock dividend | (2,216) |
Net income available to common shareholders | $ 15,822 |
Earnings per common share - basic | $ 1.32 |
Earnings per common share - diluted | $ 1.32 |
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Common shares used in basic earnings per share calculation | 11,990,154 |
7. | LEGAL PROCEEDINGS |
A former business associate (Plaintiff) of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, commenced a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff subsequently amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgment as to the Plaintiff's continuing interest in the Company. The Plaintiff sought money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claimed to have a continuing interest) and an accounting. The amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as additional defendants. In April 2000, following trial, the jury rendered a verdict adverse to the Company with respect to Plaintiff's claims for breach of contract and breach of general partnership/joint venture arrangement and found total compensatory damages in the amount of $6,462,068. Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify the Company for costs and any loss arising from the lawsuit and their obligation to do so is secured by an escrow arrangement covering shares of the Company's common stock owned by them having a current value substantially in excess of the amount of damages found by the jury. The Company has filed a post-trial motion for judgment as a matter of law and a motion for a new trial. In the event that the relief sought by these motions is not granted, the Company intends to appeal. In view of the indemnification agreement and escrow arrangement, the Company does not believe that the lawsuit will have a material adverse effect upon the Company.
8. | EARNINGS PER SHARE |
The Company reports earnings per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share." In computing earnings per share, the Company excludes preferred stock dividends from net income to arrive at net income available to common shareholders. The following table sets forth the computation of basic and diluted earnings per common share:
| Nine Months Ended | Nine Months Ended | ||||
Numerator: |
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Net income available to common shareholders | $ 15,779 | $ 19,181 | ||||
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Denominator: |
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Denominator for basic earnings per share - |
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Effect of Diluted Securities: |
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Stock options | 1 | 14 | ||||
Denominator for diluted earnings per share - |
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Basic earnings per common share | $ 1.31 | $ 1.54 | ||||
Diluted earnings per common share | $ 1.31 | $ 1.54 | ||||
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL |
The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.
The Company operates as a Real Estate Investment Trust ("REIT") and owns and operates a portfolio of 226 self-storage facilities, providing storage space for business and personal use to customers in 21 states. The Company's investment objective is to increase cash flow and enhance shareholder value by aggressively managing its portfolio, to expand and enhance the facilities in that portfolio and to selectively acquire new properties in geographic areas that will either complement or efficiently grow the portfolio.
When used in this discussion and elsewhere in this document, the words "intends," "believes," "anticipates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, and in Section 21F of Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; the Company's ability to evaluate, finance and integrate acquired businesses into the Company's existing business and operations; the Company's existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; the Company's ability to effectively compete in the industries in which it does business; the Company's ability to successfully implement its Uncle Bob's Flex-a-Space strategy; the Company's cash flow may be insufficient to meet required payments of principal and interest; and tax law changes which may change the taxability of future income.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had a $150 million unsecured credit facility, of which $146.5 million was drawn. The facility was scheduled to mature February 2001 and had an interest at LIBOR plus 1.25%.
In addition to the credit facility, the Company had an unsecured term note due December 2000, bearing interest at LIBOR plus 1.50%.
On November 7, 2000, the Company negotiated and funded a new unsecured debt package with a syndicate of banks. The new agreement provides for a $150 million revolving line of credit maturing November 2003 at LIBOR plus 1.37%, a $75 million term note through November 2003 (extendable to 2005 at the Company's option) at LIBOR plus 1.75%, and a $30 million term loan through November 2001 at LIBOR plus 1.37%.
Proceeds from the new loans will be used to repay the Company's existing line of credit and term loans totaling $225 million as of the funding date. The Company plans to use the remaining proceeds to finance its revenue enhancing improvements, acquire certain strategic facilities and provide bridge financing for potential joint venture programs.
The new credit agreements allowed the Company to maintain investment grade ratings from Standard and Poors (BBB-), Moodys (Baa3), and Duff and Phelps (BBB-).
While the Company has purchased contracts protecting it from significant interest rate increases, it does not intend to enter long term contracts to fix its interest rate exposure at this time. Accordingly, the interest expense the Company incurs will be dependent upon market conditions until such time as the Company enters into such contracts.
In July 1999, the Company issued 1,200,000 shares of 9.85% Series B Cumulative Redeemable Preferred Stock. The net proceeds of $28.6 million were used to repay a portion of the credit facility. The Series B Preferred Stock is currently rated by Standard and Poors (BB+), Moodys (Ba2) and Duff and Phelps (BB+).
The Company believes that its internally generated cash flows and borrowing capacity under the credit facility will be sufficient to fund ongoing operations, capital improvements, dividends, and acquisitions for the year 2000.
COMMON STOCK REPURCHASE PROGRAM
The Company continued its common stock repurchase program authorized by the Board of Directors by acquiring 21,000 shares for $.4 million during the third quarter of 2000. At September 30, 2000, the total shares repurchased by the Company were 772,700 at a total cost of $16.2 million.
UMBRELLA PARTNERSHIP REIT
The Company was formed as an Umbrella Partnership Real Estate Trust ("UPREIT") and, as such, has the ability to issue operating partnership ("OP") units in exchange for properties sold by independent owners. By utilizing such OP units as currency in facility acquisitions, the Company may partially defer the seller's income-tax liability and obtain more favorable pricing or terms. As of September 30, 2000, 853,037 units have been issued in exchange for property at the request of the sellers.
ACQUISITION OF PROPERTIES
The Company's external growth strategy is to increase the number of facilities it owns by acquiring suitable facilities in markets in which it already has an operating presence or to expand into new markets by acquiring several facilities at once in those new markets. There were no acquisitions in the third quarter.
FUTURE ACQUISITION AND DEVELOPMENT PLANS
The Company has a contract on one property in Alabama with an expected closing in November 2000. The Company also intends to improve certain of its existing facilities by building additional storage buildings on presently vacant land and by installing climate control and enhanced security systems at selected sites.
REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS
As a REIT, the Company is not required to pay federal income tax on income that it distributes to its shareholders, provided that the amount distributed is equal to at least 95% of taxable income. These distributions must be made in the year to which they relate or in the following year if declared before the Company files its federal income-tax return and if it is paid before the first regular dividend of the following year.
As a REIT, the Company must derive at least 95% of its total gross income from income related to real property, interest and dividends. In the nine months ended September 30, 2000, the Company's percentage of revenue from such sources exceeded 98%, thereby passing the 95% test, and no special measures are expected to be required to enable the Company to maintain its REIT designation.
RESULTS OF OPERATIONS
The following discussion is based on the financial statements of the Company as of September 30, 2000 and September 30, 1999.
FOR THE PERIOD JANUARY 1, 2000 THROUGH SEPTEMBER 30, 2000 (DOLLARS IN THOUSANDS)
The Company reported revenues of $67,573 during the period and incurred $20,740 in operating expenses, resulting in net operating income of $46,833, or 69.3%. General and administrative expenses of $4,341, interest expense of $12,673 and depreciation and amortization expenses of $10,559 resulted in income of $19,260 before minority interest. Net income amounted to $17,995.
THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 (DOLLARS IN THOUSANDS)
The following discussion compares the activities of the Company for the three months ended September 30, 2000 with the activities of the Company for the three months ended September 30, 1999.
Total revenues increased from $22,570 for the three months ended September 30, 1999 to $23,486 for the three months ended September 30, 2000, an increase of $916 or 4%. Of this, $729 resulted from the acquisition of 7 properties during the period July 1, 1999 through September 30, 2000 and $873 was realized as a result of increased rental rates at the 219 properties owned by the Company at July 1, 1999. The 1999 revenue figure includes $686 from the gain on the sale of a property in the quarter ended September 1999. Overall, same-store revenues grew 4% for the three-month period ended September 30, 2000 as compared to the same period in 1999.
Property operating and real estate tax expense increased $1,181 or 19% during the period. $210 was a result of absorbing additional expenses from operating the newly acquired properties, $620 was a result of marketing expenses relating to the Company's Uncle Bob's Flex-a-Space initiative, and $351 related to the operations of its sites operated more than one year.
General and administrative expenses increased $85 principally as a result of increased administrative costs associated with managing the additional properties.
Interest expense increased $979 due to an increase in interest rates.
Income before minority interest decreased from $8,177 to $6,632, a decrease of $1,545.
FUNDS FROM OPERATIONS
The Company believes that Funds From Operations ("FFO") is helpful to investors as a measure of the performance of an equity REIT because, when considered in conjunction with cash flows from operating activities, financing activities, and investing activities, it provides investors with an understanding of the ability of the Company to incur and service debt and to make capital expenditures. FFO is defined as income before minority interest and extraordinary item, computed in accordance with GAAP, plus depreciation of real estate assets and amortization of intangible assets exclusive of deferred financing fees, and excluding gains (losses) from debt restructuring and sales of property. FFO should not be considered a substitute for net income or cash flows, nor should it be considered an alternative to operating performance or liquidity. The following table sets forth the calculation of FFO:
| Nine months ended | Nine months ended |
Net income | $ 17,995 | $ 19,682 |
Minority interest in income | 1,265 | 1,352 |
Depreciation of real estate and amortization |
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Funds from operations allocable to |
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FFO | 27,427 | 27,572 |
Preferred dividends | (2,216) | (501) |
FFO available to common shareholders | $ 25,211 | $ 27, 071 |
INFLATION
The Company does not believe that inflation has had or will have a direct adverse effect on its operations. Substantially all of the leases at the facilities allow for monthly rent 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 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, summer and early fall months due to the greater incidence of residential moves during these periods. However, the Company believes that its tenant mix, diverse geographical locations, 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 affect materially distributions to shareholders.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company manages its exposure to interest rate changes by entering into interest rate cap agreements. There have been no material changes to the Company's exposure to interest rate risk since December 31, 1999.
PART II. | OTHER INFORMATION |
ITEM 1. | LEGAL PROCEEDINGS |
A former business associate (Plaintiff) of certain officers and directors of the Company, including Robert J. Attea, Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, commenced a lawsuit against the Company on June 13, 1995 in the United States District Court for the Northern District of Ohio. The Plaintiff subsequently amended the complaint in the lawsuit alleging breach of fiduciary duty, breach of contract, breach of general partnership/joint venture arrangement, breach of duty of good faith, fraud and deceit, and other causes of action including declaratory judgment as to the Plaintiff's continuing interest in the Company. The Plaintiff sought money damages in excess of $15 million, as well as punitive damages and declaratory and injunctive relief (including the imposition of a constructive trust on assets of the Company in which the Plaintiff claimed to have a continuing interest) and an accounting. The amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as additional defendants. In April 2000, following trial, the jury rendered a verdict adverse to the Company with respect to Plaintiff's claims for breach of contract and breach of general partnership/joint venture arrangement and found total compensatory damages in the amount of $6,462,068. Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify the Company for costs and any loss arising from the lawsuit and their obligation to do so is secured by an escrow arrangement covering shares of the Company's common stock owned by them having a current value substantially in excess of the amount of damages found by the jury. The Company has filed a post-trial motion for judgment as a matter of law and a motion for a new trial. In the event that the relief sought by these motions is not granted, the Company intends to appeal. In view of the indemnification agreement and escrow arrangement, the Company does not believe that the lawsuit will have a material adverse effect upon the Company.
ITEM 2. | CHANGES IN SECURITIES |
No disclosure required.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
No disclosure required.
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No disclosure required.
ITEM 5. | OTHER INFORMATION |
No disclosure required.
ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K |
Exhibit 27 - Financial data schedule.
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.
| Sovran Self Storage, Inc. |
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