SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
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 0-11455
SHURGARD STORAGE CENTERS, INC.
(Exact name of registrant as specified in its charter)
| WASHINGTON | 91-1603837 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| 1155 VALLEY STREET, SUITE 400, SEATTLE, WASHINGTON | 98109 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code 206-624-8100
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares outstanding at July 26, 2004
Class A Common Stock, $.001 par value, 45,974,104 shares outstanding
Explanatory Note
This Form 10-Q includes restatements of previously reported historical financial data and related descriptions for the three months and six months ended June 30, 2003. We reassessed certain accounting policies and concluded certain items had been accounted for incorrectly in the past and restated for them accordingly. In addition, we identified certain other errors impacting prior quarterly periods and corrected for them in our restatements. The restated financial statements were included in our 2003 Annual Report on Form 10-K filed on May 17, 2004. See Note C to our Condensed Consolidated Financial Statements for further discussion of this matter. Also as of January 1, 2004, pursuant to the adoption of new accounting standards, we started consolidating our European operations which had a significant effect on the presentation of our Consolidated financial position, operating results and cash-flows as of and for the three months and six months ended June 30, 2004 compared to the prior periods (See Note B to our Condensed Consolidated Financial Statements).
Shurgard Storage Centers, Inc.
Form 10-Q
For the Three Months and Six Months ended June 30, 2004
| Page | ||||
| Part I. Financial Information (Unaudited) |
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| Item 1. |
Financial Statements |
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| 3 | ||||
| 4 | ||||
| 6 | ||||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 | ||
| Item 3. |
60 | |||
| Item 4. |
60 | |||
| Part II. Other Information |
||||
| Item 1. |
61 | |||
| Item 2. |
Sale of Unregistered Securities and Change in Securities and Use of Proceeds |
61 | ||
| Item 4. |
62 | |||
| Item 5. |
62 | |||
| Item 6. |
62 | |||
| 64 | ||||
Shurgard Storage Centers, Inc.
Part I, Item 1: Condensed Consolidated Balance Sheets
(Amounts in thousands except share data)
(unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS: |
||||||||
| Storage centers: |
||||||||
| Land |
$ | 612,529 | $ | 376,832 | ||||
| Buildings and equipment, net |
1,844,910 | 1,203,799 | ||||||
| Construction in progress |
80,888 | 38,867 | ||||||
| Total storage centers |
2,538,327 | 1,619,498 | ||||||
| Investment in Shurgard Europe |
— | 319,267 | ||||||
| Cash and cash equivalents |
35,841 | 11,670 | ||||||
| Restricted cash |
12,369 | 1,585 | ||||||
| Notes receivable affiliate |
— | 56,543 | ||||||
| Goodwill |
24,206 | 24,206 | ||||||
| Other assets |
77,921 | 34,322 | ||||||
| Total assets |
$ | 2,688,664 | $ | 2,067,091 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: |
||||||||
| Accounts payable and other liabilities |
$ | 112,274 | $ | 76,862 | ||||
| Lines of credit |
696,691 | 263,220 | ||||||
| Notes payable |
763,791 | 711,026 | ||||||
| Participation rights liability, net of discount of $2,053 and $4,053, respectively |
40,623 | 40,623 | ||||||
| Total liabilities |
1,613,379 | 1,091,731 | ||||||
| Minority interest |
154,042 | 20,940 | ||||||
| Commitments and contingencies (Notes G, I, S and V) |
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| Shareholders’ equity: |
||||||||
| Series C Cumulative Redeemable Preferred Stock; $0.001 par value; 2,000,000 shares authorized; 2,000,000 shares issued and outstanding; liquidation preference of $50,000,000 |
48,115 | 48,115 | ||||||
| Series D Cumulative Redeemable Preferred Stock; $0.001 par value; 3,450,000 shares authorized; 3,450,000 shares issued and outstanding; liquidation preference of $86,250,000 |
83,068 | 83,068 | ||||||
| Class A Common Stock, $0.001 par value; 120,000,000 authorized; 45,967,271 and 45,747,751 shares issued and outstanding, respectively |
46 | 46 | ||||||
| Additional paid-in capital |
1,109,344 | 1,100,949 | ||||||
| Accumulated net income less distributions |
(322,938 | ) | (287,516 | ) | ||||
| Accumulated other comprehensive income |
3,608 | 9,758 | ||||||
| Total shareholders’ equity |
921,243 | 954,420 | ||||||
| Total liabilities and shareholders’ equity |
$ | 2,688,664 | $ | 2,067,091 | ||||
See notes to unaudited Condensed Consolidated Financial Statements
3
Shurgard Storage Centers, Inc.
Part I, Item 1: Condensed Consolidated Statements of Net Income
(unaudited)
(Amounts in thousands except per share data)
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (as restated) | (as restated) | |||||||||||||||
| Revenue |
||||||||||||||||
| Storage center operations |
$ | 103,571 | $ | 71,562 | $ | 201,965 | $ | 139,979 | ||||||||
| Other |
753 | 1,123 | 1,553 | 2,414 | ||||||||||||
| Total revenue |
104,324 | 72,685 | 203,518 | 142,393 | ||||||||||||
| Expenses |
||||||||||||||||
| Operating |
42,654 | 24,613 | 84,191 | 47,210 | ||||||||||||
| Depreciation and amortization |
21,390 | 13,132 | 41,608 | 26,784 | ||||||||||||
| Real estate taxes |
8,212 | 6,794 | 17,319 | 13,759 | ||||||||||||
| Impairment expense |
— | 1,730 | — | 1,730 | ||||||||||||
| General, administrative and other |
7,851 | 3,517 | 17,071 | 6,123 | ||||||||||||
| Total expenses |
80,107 | 49,786 | 160,189 | 95,606 | ||||||||||||
| Income from storage center operations |
24,217 | 22,899 | 43,329 | 46,787 | ||||||||||||
| Other Income (Expense) |
||||||||||||||||
| Equity in earnings (losses) of other real estate investments, net |
23 | (1,747 | ) | 25 | (2,375 | ) | ||||||||||
| Interest: |
||||||||||||||||
| Interest on loans |
(19,662 | ) | (12,597 | ) | (38,471 | ) | (23,296 | ) | ||||||||
| Amortization of participation rights discount |
(1,000 | ) | (281 | ) | (2,000 | ) | (560 | ) | ||||||||
| Unrealized gain (loss) on derivatives |
662 | (1,193 | ) | (115 | ) | (2,226 | ) | |||||||||
| Interest income and other (expense), net |
245 | 1,654 | (1,191 | ) | 3,429 | |||||||||||
| Other expense, net |
(19,732 | ) | (14,164 | ) | (41,752 | ) | (25,028 | ) | ||||||||
| Minority interest |
3,819 | (272 | ) | 8,351 | (498 | ) | ||||||||||
| Income from continuing operations before income taxes |
8,304 | 8,463 | 9,928 | 21,261 | ||||||||||||
| Income tax expense |
— | — | (23 | ) | — | |||||||||||
| Income from continuing operations |
8,304 | 8,463 | 9,905 | 21,261 | ||||||||||||
| Discontinued operations |
||||||||||||||||
| Income from discontinued operations |
513 | 447 | 946 | 903 | ||||||||||||
| Gain on sale of discontinued operations |
11,990 | — | 11,990 | — | ||||||||||||
| Total discontinued operations |
12,503 | 447 | 12,936 | 903 | ||||||||||||
| Income before cumulative effect of change in accounting principle |
20,807 | 8,910 | 22,841 | 22,164 | ||||||||||||
| Cumulative effect of change in accounting principle |
||||||||||||||||
| Cumulative effect of change in accounting principle |
— | — | (2,339 | ) | — | |||||||||||
| Net income |
20,807 | 8,910 | 20,502 | 22,164 | ||||||||||||
| Net Income Allocation |
||||||||||||||||
| Preferred stock dividends |
(2,974 | ) | (2,974 | ) | (5,948 | ) | (5,948 | ) | ||||||||
| Net income available to common shareholders |
$ | 17,833 | $ | 5,936 | $ | 14,554 | $ | 16,216 | ||||||||
See notes to unaudited Condensed Consolidated Financial Statements
4
| For the three months ended June 30, |
For the six months ended June 30, | ||||||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||||||
| (as restated) | (as restated) | ||||||||||||
| Net Income per Common Share - Basic: |
|||||||||||||
| Income from continuing operations available to common shareholders |
$ | 0.12 | $ | 0.16 | $ | 0.09 | $ | 0.43 | |||||
| Discontinued operations |
0.27 | 0.01 | 0.28 | 0.02 | |||||||||
| Cumulative effect of change in accounting principle |
— | — | (0.05 | ) | — | ||||||||
| Net income per share |
$ | 0.39 | $ | 0.17 | $ | 0.32 | $ | 0.45 | |||||
| Net Income per Common Share - Diluted: |
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