Exhibit 99.1
Sovran Self Storage Reports Third Quarter Results and
Acquisition of Two Self-Storage Facilities
BUFFALO, N.Y.--(BUSINESS WIRE)--Nov. 3, 2004--Sovran Self Storage,
Inc. (NYSE:SSS), a self-storage real estate investment trust (REIT),
reported operating results for the quarter ended September 30, 2004.
Net income available to common shareholders for the third quarter
of 2004 was $5.5 million or $.35 per diluted share. Net income
available to common shareholders for the same period in 2003 was $4.8
million or $.35 per diluted share. Funds from operations for the
quarter were $9.7 million or $.62 per fully diluted common share
compared to $10.0 million or $.74 per fully diluted share for the
quarter ended September 30, 2003. Improved occupancies and revenue
growth were offset by a $1.4 million charge associated with the
Company's redemption of its Series B Preferred Stock, previously
announced expenses resulting from hurricane damage in Florida and
dilution attributable to the issuance of almost 2 million common
shares via the Company's Dividend Reinvestment and Stock Purchase Plan
and Employee Stock Option Plan since September 30, 2003.
David Rogers, the Company's Chief Financial Officer, commented,
"The costs associated with the preferred stock redemption and the
hurricanes masked an otherwise excellent quarter. Our revenues and
occupancies are up, our operating margins are strong and the ten
properties we acquired this year are doing great."
OPERATIONS:
Total Company net operating income for the third quarter grew 9.7%
compared with the same quarter in 2003 to $20.6 million. This growth
was the result of improved operating performance and additional stores
acquired in 2003 and the nine months of 2004. Overall average
occupancy was 86% and average rent per square foot for the portfolio
was $9.60.
Revenues at the 259 stores owned and/or managed for the entire
quarter in both years increased 5.4% over the third quarter of 2003,
the result of a 4.1% increase in rental rates, a 50 basis point
increase in average occupancy and a 20% increase in truck rental and
other revenues. Increased personnel, utilities, and insurance costs
caused same store operating expenses to increase by 5.2%.
Additionally, storm damage costs of over $600,000 for the four Florida
hurricanes was incurred. As a result, same store net operating income
improved by 2.5% for the 3rd quarter (5.6% excluding hurricane costs).
During the quarter, the Company continued to advance its revenue
initiatives. The Dri-guard humidity control system was installed at 6
more stores; it is now featured at 69 facilities. A total of 208
stores now provide free use of a truck to make it easier for customers
to move into their storage spaces. The Company's call center is fully
operational as an integrated sales and reservation system. All calls
to the 271 Uncle Bob's stores are routed to the Customer Care Center,
where operators serve as leasing agents for over 140,000 rental
spaces.
Strong performance was shown at the Company's stores throughout
the Virginia, Florida, South Carolina and New York markets, while some
of the Ohio, Texas, and New England stores experienced slower than
expected growth during the quarter.
ACQUISITIONS AND SALES:
The Company acquired two stores during the quarter. A 128,000 sq.
ft. facility was acquired in Chattanooga, TN at a cost of $6.9
million; there are now four Uncle Bob's stores in that market. The
Company added a fifth store in Austin, TX; a 187,000 sq. ft. facility
with a purchase price of $7.9 million.
The Company sold its facility in Spartanburg, SC in September.
This brings to a total of five Uncle Bob's stores sold in 2004.
CAPITAL TRANSACTIONS:
The Company entered into three previously announced financing
transactions to increase its credit capacity and extend the maturities
on its outstanding debt. The Company has issued $100 million of 10
year notes with an effective interest rate of 6.3%, $100 million of 5
year notes at LIBOR plus 150bp, and has negotiated a $75 million
credit facility (expandable to $100 million) at LIBOR plus 137.5bp. At
September 30, 2004, the Company had interest rate swap contracts in
place on all but $42 million of its variable rate debt, and had $52
million outstanding on its line of credit.
During the quarter, the Company issued 290,000 shares through its
dividend reinvestment program, direct stock purchase plan and employee
option plan. A total of $11.0 million was received, which was used to
fund part of the Series B Preferred Stock redemption costs.
The Company's Board of Directors authorized the repurchase of up
to two million shares of the Company's common stock. To date, the
Company has acquired approximately 1.2 million shares pursuant to the
program. The Company expects such repurchases to be effected from time
to time, in the open markets or in private transactions. The amount
and timing of shares to be purchased will be subject to market
conditions and will be based on several factors, including compliance
with lender covenants and the price of the Company's stock. No
assurance can be given as to the specific timing or amount of the
share repurchases or as to whether and to what extent the share
repurchase will be consummated. The Company did not acquire any shares
in the quarter ended September 30, 2004.
On August 2, 2004, the Company redeemed its Series B 9.85%
Preferred Stock for $30 million. Proceeds of the sale of common stock
via the Company's Dividend Reinvestment Program and Share Purchase
Plan since last September funded the redemption.
On August 4, 2004, the Company issued 306,748 shares of its common
stock in connection with a written notice from a holder of its Series
C Preferred Stock requesting the conversion of 400,000 shares of
Series C Preferred Stock into common stock. The shares of the
Company's common stock issued upon conversion of the Series C
Preferred Stock are registered for resale under the Securities Act of
1933, as amended, and, accordingly, are freely tradable by the holder.
As of September 30, 2004, after giving effect to the conversion, the
Company had 2,400,000 shares of its Series C Preferred Stock
outstanding and 15,638,661 shares of its common stock outstanding.
YEAR 2004 EARNINGS GUIDANCE:
The Company expects conditions in most of its markets to remain
stable, and believes that growth in net operating income on a same
store basis will be moderate. It expects to continue implementation of
its Dri-guard and Uncle Bob's Truck initiatives, as well as other
revenue enhancing programs, in which the Company is investing $6 to $7
million of capital expenditures this year.
As opportunities arise, the Company may acquire self-storage
facilities with high growth potential for its own portfolio, and may
sell certain facilities depending on market conditions. For purposes
of issuing guidance, the Company is forecasting no further
acquisitions or dispositions in 2004.
Recent cost increases incurred by the Company, especially for
property insurance, Directors and Officers insurance, and fees and
expenses associated with Sarbanes Oxley Section 404 Compliance, have
negatively affected operating results in the third quarter. The
Company expects these costs to continue and has adjusted guidance
accordingly.
At September 30, 2004, all but $42 million of the Company's debt
is either fixed rate, or covered by rate swap contracts that
essentially fix the rate. Subsequent borrowings that may occur will be
pursuant to the Company's Line of Credit agreement at a floating rate
of LIBOR plus 1.38%.
Management expects funds from operations for 2004 to be between
$2.64 and $2.67 per share. Funds from operations for the fourth
quarter of 2004 are projected at between $.71 and $.73 per share.
FORWARD LOOKING STATEMENTS:
When used within this news release, the words "intends,"
"believes," "expects," "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 could 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 ability to form joint ventures and sell
existing properties to those joint ventures; 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; interest rates
may fluctuate, impacting costs associated with the Company's
outstanding floating rate debt; the regional concentration of the
Company's business may subject it to economic downturns in the states
of Florida and Texas; the Company's ability to effectively compete in
the industries in which it does business; the Company's ability to
successfully extend its truck leasing program and Dri-guard product
roll-out; the Company's reliance on its call center; 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.
CONFERENCE CALL:
Sovran Self Storage will hold its Third Quarter Earnings Release
Conference Call at 9:00 a.m. Eastern Standard Time on Thursday,
November 4, 2004. Anyone wishing to listen to the call may access the
webcast via Sovran's homepage www.sovranss.com. The call will be
archived for a period of 90 days after initial airing.
Sovran Self Storage, Inc. is a self-administered and self-managed
equity REIT whose business is acquiring, developing and managing
self-storage facilities. The Company owns and/or operates 271 stores
under the "Uncle Bob's Self Storage"(R) trade name in 21 states. For
more information, please contact David Rogers, CFO or Diane Piegza, VP
Investor Relations at (716) 633-1850 or visit the Company's Web site.
SOVRAN SELF STORAGE, INC.
BALANCE SHEET DATA
September 30,
2004 December 31,
(dollars in thousands) (unaudited) 2003
- ---------------------- ------------------------
Assets
Investment in storage
facilities:
Land $ 148,296 $ 134,248
Building and equipment 657,799 593,041
----------- -----------
806,095 727,289
Less: accumulated
depreciation (104,729) (90,682)
----------- -----------
Investments in storage
facilities, net 701,366 636,607
Cash and cash equivalents 4,951 20,101
Accounts receivable 1,463 1,626
Receivable from related
parties 90 95
Notes receivable from joint
ventures 2,727 2,133
Investment in joint ventures 1,295 2,926
Prepaid expenses 3,360 3,093
Other assets 5,539 6,079
Net assets of discontinued
operations - 10,676
----------- -----------
Total Assets $ 720,791 $ 683,336
=========== ===========
Liabilities
Line of credit $ 52,000 $ 9,000
Term notes 200,000 200,000
Accounts payable and accrued
liabilities 11,004 10,069
Deferred revenue 3,714 3,440
Fair value of interest rate
swap agreements 4,979 7,835
Accrued dividends 9,461 8,592
Mortgage payable 46,271 46,819
----------- -----------
Total Liabilities 327,429 285,755
Minority interest -
Operating Partnership 12,206 13,671
Minority interest - Locke
Sovran II, LLC 15,154 15,713
Shareholders' Equity
9.85% Series B Cumulative
Preferred Stock - 28,585
8.375% Series C Convertible
Cumulative Preferred Stock 53,227 67,129
Common stock 168 154
Additional paid-in capital 405,172 356,875
Unearned restricted stock (1,877) (1,722)
Dividends in excess of net
income (58,789) (48,069)
Accumulated other
comprehensive loss (4,724) (7,580)
Treasury stock at cost (27,175) (27,175)
----------- -----------
Total Shareholders'
Equity 366,002 368,197
----------- -----------
Total Liabilities and
Shareholders' Equity $ 720,791 $ 683,336
=========== ===========
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
July 1, July 1,
2004 2003
to to
(dollars in thousands, except September 30, September 30,
per share data) 2004 2003
------------------------
Revenues:
Rental income $ 31,433 $ 27,938
Other operating income 988 802
------------------------
Total operating revenues 32,421 28,740
Expenses:
Property operations and
maintenance 8,895 7,486
Real estate taxes 2,957 2,510
General and administrative 2,730 2,509
Depreciation and
amortization 5,119 4,746
----------- -----------
Total operating expenses 19,701 17,251
----------- -----------
Income from operations 12,720 11,489
Other income (expense)
Interest expense (4,602) (3,707)
Interest income 98 104
Write-off of unamortized
financing fees - (713)
Minority interest -
Operating Partnership (233) (286)
Minority interest -
consolidated joint venture (149) (165)
Equity in income of joint
ventures 65 64
----------- -----------
Income from continuing
operations 7,899 6,786
Income from discontinued
operations 513 227
----------- -----------
Net Income 8,412 7,013
Redemption amount in excess
of carrying value of
Series B Preferred Stock (1,415) -
Preferred stock dividends (1,503) (2,204)
----------- -----------
Net income available to common
shareholders $ 5,494 $ 4,809
=========== ===========
Per common share - basic:
Continuing operations $ 0.33 $ 0.34
Discontinued operations 0.03 0.02
----------- -----------
Earnings per common share
- basic $ 0.36 $ 0.36
=========== ===========
Per common share - diluted:
Continuing operations $ 0.32 $ 0.33
Discontinued operations 0.03 0.02
----------- -----------
Earnings per common share
- diluted $ 0.35 $ 0.35
=========== ===========
Common shares used in basic
earnings per share
calculation 15,414,524 13,426,533
Common shares used in diluted
earnings per share
calculation 15,505,652 13,551,836
Dividends declared per common
share $ 0.6050 $ 0.6025
=========== ===========
January 1, January 1,
2004 2003
to to
(dollars in thousands, except September 30, September 30,
per share data) 2004 2003
------------------------
Revenues:
Rental income $ 88,502 $ 80,804
Other operating income 2,638 2,066
----------- -----------
Total operating revenues 91,140 82,870
Expenses:
Property operations and
maintenance 23,820 21,004
Real estate taxes 8,417 7,596
General and administrative 7,816 7,175
Depreciation and
amortization 14,678 13,951
----------- -----------
Total operating expenses 54,731 49,726
----------- -----------
Income from operations 36,409 33,144
Other income (expense)
Interest expense (13,015) (10,825)
Interest income 315 311
Write-off of unamortized
financing fees - (713)
Minority interest -
Operating Partnership (782) (893)
Minority interest -
consolidated joint venture (345) (480)
Equity in income of joint
ventures 154 97
----------- -----------
Income from continuing
operations 22,736 20,641
Income from discontinued
operations 1,306 618
----------- -----------
Net Income 24,042 21,259
Redemption amount in excess
of carrying value of
Series B Preferred Stock (1,415) -
Preferred stock dividends (5,911) (6,613)
----------- -----------
Net income available to common
shareholders $ 16,716 $ 14,646
=========== ===========
Per common share - basic:
Continuing operations $ 1.03 $ 1.06
Discontinued operations 0.09 0.05
----------- -----------
Earnings per common share
- basic $ 1.12 $ 1.11
=========== ===========
Per common share - diluted:
Continuing operations $ 1.02 $ 1.05
Discontinued operations 0.09 0.05
----------- -----------
Earnings per common share
- diluted $ 1.11 $ 1.10
=========== ===========
Common shares used in basic
earnings per share
calculation 14,946,367 13,152,339
Common shares used in diluted
earnings per share
calculation 15,071,366 13,267,558
Dividends declared per common
share $ 1.8100 $ 1.8025
=========== ===========
COMPUTATION OF FUNDS FROM
OPERATIONS (FFO) (1)
(unaudited)
July 1, July 1,
2004 2003
to to
(dollars in thousands, except September 30, September 30,
per share data) 2004 2003
--------------------------
Net income $ 8,412 $ 7,013
Minority interest in income 382 451
Depreciation of real estate
and amortization of intangible
assets exclusive of deferred
financing fees 4,940 4,676
Depreciation of real estate
included in discontinued
operations 8 -
Depreciation and amortization
from unconsolidated joint
ventures 116 112
Write-off of unamortized
financing fees - 713
Gain on sale of real estate (554) -
Redemption amount in excess of
carrying value of Series B
Preferred Stock (1,415) -
Preferred dividends (1,503) (2,204)
Funds from operations
allocable to minority
interest in Operating
Partnership (322) (372)
Funds from operations
allocable to minority
interest in Locke
Sovran II, LLC (396) (396)
----------- -----------
Funds from operations
available to common
shareholders 9,668 9,993
FFO per share - diluted $ 0.62 $ 0.74
January 1, January 1,
2004 2003
to to
(dollars in thousands, except September 30, September 30,
per share data) 2004 2003
------------------------
Net income $ 24,042 $ 21,259
Minority interest in income 1,127 1,373
Depreciation of real estate
and amortization of
intangible assets exclusive
of deferred financing fees 14,181 13,553
Depreciation of real estate
included in discontinued
operations 90 -
Depreciation and amortization
from unconsolidated joint
ventures 350 337
Write-off of unamortized
financing fees - 713
Gain on sale of real estate (1,148) -
Preferred dividends (5,911) (6,613)
Redemption amount in excess of
carrying value of Series B
Preferred Stock (1,415) -
Funds from operations
allocable to minority
interest in Operating
Partnership (962) (1,161)
Funds from operations
allocable to minority
interest in Locke
Sovran II, LLC (1,072) (1,165)
----------- -----------
Funds from operations
available to common
shareholders 29,282 28,296
FFO per share - diluted $ 1.94 $ 2.14
(1) The Company believes that Funds from Operations ("FFO") provides
relevant and meaningful information about its operating
performance that is necessary, along with net earnings and cash
flows, for an understanding of its operating results. FFO adds
back historical cost depreciation, which assumes the value of real
estate assets diminishes predictability in the future. In fact,
real estate asset values increase or decrease with market
conditions. Consequently, the Company believes FFO is a useful
supplemental measure in evaluating its operating performance by
disregarding (or adding back) historical cost depreciation.
FFO is defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") as net income computed in
accordance with generally accepted accounting principles ("GAAP"),
excluding gains or losses on sales of properties, plus depreciation
and amortization and after adjustments to record unconsolidated
partnerships and joint ventures on the same basis. We believe that to
further understand our performance, FFO should be compared with our
reported net income and cash flows in accordance with GAAP, as
presented in our consolidated financial statements.
Our computation of FFO may not be comparable to FFO reported by
other REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with
GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance, as an alternative to net cash flows from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, or as an indicator of our ability to make cash
distributions.
QUARTERLY SAME STORE DATA (2) July 1, July 1,
2004 2003
to to
(dollars in thousands) September 30, September 30, Percentage
2004 2003 Change
----------------------------------------
Revenues:
Rental income $ 30,894 $ 29,415 5.0%
Other operating income 927 771 20.2%
----------- ----------- ----
Total operating revenues 31,821 30,186 5.4%
Expenses:
Property operations,
maintenance, and real
estate taxes 11,655 10,513 10.9%
----------- ----------- -----
Operating income $ 20,166 $ 19,673 2.5%
(2) Includes the 259 stores owned and/or managed by the Company
for the entire periods presented.
YEAR TO DATE SAME STORE DATA January 1, January 1,
(3) 2004 2003
to to
(dollars in thousands) September September Percentage
30, 2004 30, 2003 Change
----------------------------------------
Revenues:
Rental income $ 87,023 $ 82,948 4.9%
Other operating income 2,462 1,944 26.6%
----------- ----------- -----
Total operating revenues 89,485 84,892 5.4%
Expenses:
Property operations,
maintenance, and real
estate taxes 32,099 29,664 8.2%
----------- ----------- ----
Operating income $ 57,386 $ 55,228 3.9%
(3) Includes the 255 stores owned and/or managed by the Company
for the entire periods presented.
OTHER DATA Same Store (2) All Stores
-------------------- ---------------
2004 2003 2004 2003
------- ------- ------ -----
Weighted average quarterly
occupancy 86.6% 86.1% 86.0% 86.1%
Occupancy at September 30 86.0% 85.8% 85.4% 85.8%
Rent per occupied square foot $9.40 $9.03 $9.60 $9.03
Investment in Storage
Facilities:
- ---------------------
The following summarizes
activity in storage
facilities during the nine
months ended September 30,
2004:
Beginning balance $727,289
Property acquisitions 66,154
Improvements and equipment
additions:
Dri-guard humidity control
installations 1,552
Expansions 4,303
Roofing, paving, painting,
and equipment 5,912
Rental trucks 1,075
Dispositions (190)
--------
Storage facilities at cost at
period end $806,095
========
September September
30, 2004 30, 2003
------------------------
Common shares outstanding at
September 30 15,638,661 13,666,773
Operating Partnership Units
outstanding at September 30 497,999 544,865
CONTACT: Sovran Self Storage, Inc., Buffalo
David Rogers or Diane Piegza
716-633-1850