UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Commission File Number: 001-32269
EXTRA SPACE STORAGE INC.
(Exact name of registrant as specified in its charter)
| Maryland | 20-1076777 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 2795 East Cottonwood Parkway Salt Lake City, Utah |
84121 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code:
(801) 562-5556
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 ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of November 19, 2004 was 31,169,950.
EXTRA SPACE STORAGE INC.
Note that the financial statements covered in this report for the three and nine month periods ended September 30, 2003 and for the period from January 1, 2004 to August 16, 2004 contain the results of operations and financial condition of Extra Space Storage LLC (“the Predecessor”) and its subsidiaries, the predecessor to Extra Space Storage Inc. and its subsidiaries, prior to the consummation of Extra Space Storage Inc.’s initial public offering on August 17, 2004, and various formation transactions. In addition, the financial statements covered in this report contain the results of operations and financial condition of Extra Space Storage Inc. (“the Company”) for the period from August 17, 2004 to September 30, 2004. Due to the timing of the offering and the formation transactions, we do not believe that the results of operations discussion set forth in this document is necessarily indicative of our future operating results as a publicly-held company.
Extra Space Storage Inc.
Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share data)
| Company |
Predecessor |
|||||||
| As of September 30, 2004 |
As of December 31, 2003 |
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| Assets: |
||||||||
| Real estate assets: |
||||||||
| Net operating real estate assets |
$ | 670,775 | $ | 274,434 | ||||
| Real estate under development |
8,949 | 79,940 | ||||||
| Net real estate assets |
679,724 | 354,374 | ||||||
| Investments in real estate ventures |
5,383 | 8,438 | ||||||
| Cash |
32,006 | 11,746 | ||||||
| Restricted cash |
5,754 | 1,558 | ||||||
| Receivables from related parties |
714 | 2,066 | ||||||
| Other assets, net |
14,019 | 5,569 | ||||||
| Total assets |
$ | 737,600 | $ | 383,751 | ||||
| Liabilities, Minority Interests, Redeemable Units and Members’ and Shareholders’ Equity (Deficit): |
||||||||
| Liabilities: |
||||||||
| Borrowings |
$ | 454,023 | $ | 273,808 | ||||
| Accounts payable |
2,949 | 2,318 | ||||||
| Payables to related parties |
— | 24,824 | ||||||
| Putable preferred interests in consolidated joint ventures, net |
— | 33,434 | ||||||
| Other liabilities |
7,628 | 5,276 | ||||||
| Total liabilities |
464,600 | 339,660 | ||||||
| Commitments and contingencies (Note 16) |
||||||||
| Redeemable minority interest—Fidelity |
— | 17,966 | ||||||
| Minority interest in Operating Partnership |
21,984 | — | ||||||
| Other minority interests |
— | 4,424 | ||||||
| Redeemable Class C Units |
— | 11,208 | ||||||
| Redeemable Class E Units |
— | 14,900 | ||||||
| Members’ and shareholders’ equity (deficit): |
||||||||
| Class A Units |
— | 5,226 | ||||||
| Class B Units |
— | 48,274 | ||||||
| Note receivable from Centershift |
— | (4,493 | ) | |||||
| Preferred Shares, 50,000,000 shares authorized at $0.01 per share, none issued and outstanding at September 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common Shares, 200,000,000 shares authorized at $0.01 per share, 31,169,950 issued and outstanding at September 30, 2004 |
312 | — | ||||||
| Capital contributed in excess of par value |
347,882 | |||||||
| Accumulated deficit |
(97,178 | ) | (53,414 | ) | ||||
| Total members’ and shareholders’ equity (deficit) |
251,016 | (4,407 | ) | |||||
| Total liabilities, minority interests, redeemable units and members’ and shareholders’ equity (deficit) |
$ | 737,600 | $ | 383,751 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Extra Space Storage Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
| Company |
Predecessor |
Company |
Predecessor |
|||||||||||||
| Three-Month Period Ended September 30, |
Three-Month Period Ended September 30, |
Nine-Month Period Ended September 30, |
Nine-Month Period Ended September 30, |
|||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Property rental revenues |
$ | 17,536 | $ | 8,421 | $ | 40,547 | $ | 24,051 | ||||||||
| Management fees |
353 | 489 | 1,329 | 1,522 | ||||||||||||
| Acquisition fees and development fees |
250 | 40 | 649 | 556 | ||||||||||||
| Other income |
29 | 184 | 498 | 554 | ||||||||||||
| Total Revenues |
18,168 | 9,134 | 43,023 | 26,683 | ||||||||||||
| Expenses: |
||||||||||||||||
| Property operating expenses |
6,846 | 3,655 | 17,136 | 10,935 | ||||||||||||
| Unrecovered development/acquisition costs and support payments |
— | 822 | 683 | 1,507 | ||||||||||||
| General and administrative expense |
2,905 | 1,912 | 9,148 | 5,869 | ||||||||||||
| Depreciation and amortization |
5,057 | 1,688 | 10,823 | 4,586 | ||||||||||||
| Total Expenses |
14,808 | 8,077 | 37,790 | 22,897 | ||||||||||||
| Income before interest expense, minority interests, equity in earnings of real estate ventures and gain on sale of real estate assets |
3,360 | 1,057 | 5,233 | 3,786 | ||||||||||||
| Interest expense |
(9,741 | ) | (4,703 | ) | (22,742 | ) | (13,476 | ) | ||||||||
| Loss on debt extinguishments |
(951 | ) | — | (2,723 | ) | — | ||||||||||
| Minority interest—Fidelity preferred return |
(916 | ) | (1,038 | ) | (3,136 | ) | (3,070 | ) | ||||||||
| Minority interest—Operating Partnership |
213 | — | 213 | — | ||||||||||||
| Loss allocated to other minority interests |
634 | 454 | 2,164 | 996 | ||||||||||||
| Equity in earnings of real estate ventures |
404 | 418 | 1,097 | 1,289 | ||||||||||||
| Gain on sale of real estate assets |
1,920 | — | 1,749 | 672 | ||||||||||||
| Net loss |
$ | (5,077 | ) | $ | (3,812 | ) | $ | (18,145 | ) | $ | (9,803 | ) | ||||
| Return earned on Class B, C and E units |
(1,465 | ) | (1,354 | ) | (5,758 | ) | (4,074 | ) | ||||||||
| Loss on early redemption of Fidelity minority interest |
(1,478 | ) | — | (1,478 | ) | — | ||||||||||
| Net loss attributable to common shareholders |
$ | (8,020 | ) | $ | (5,166 | ) | $ | (25,381 | ) | $ | (13,877 | ) | ||||
| Basic loss per share (1) |
$ | (.53 | ) | $ | (1.15 | ) | $ | (2.59 | ) | $ | (3.09 | ) | ||||
| Diluted loss per share (1) |
$ | (.53 | ) | $ | (1.15 | ) | $ | (2.59 | ) | $ | (3.09 | ) | ||||
| Weighted average basic shares outstanding |
15,241,832 | 4,491,902 | 9,806,532 | 4,491,902 | ||||||||||||
| Weighted average diluted shares outstanding |
15,241,832 | 4,491,902 | 9,806,532 | 4,491,902 | ||||||||||||
| (1) | The basic and diluted loss per share does not include the potential effects of the CCSs and CCUs as such securities would not have participated in earnings for any of the periods presented. These securities will not participate in distributions until they are converted, which cannot occur prior to March 31, 2006. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Extra Space Storage Inc.
Condensed Consolidated Statement of Redeemable Units and Members’ and Shareholders’ Equity (Deficit) (Unaudited)
(in thousands)
| Redeemable Units |
Members’ and Shareholders’ Equity |
||||||||||||||||||||||||||
| Class C and E Units |
Class A and B Units |
Note receivable from Centershift |
Common Shares |
Capital in Excess of Par Value |
Accumulated Deficit |
Total Members’ and Shareholders’ Equity (Deficit) |
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| Predecessor |
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| Balance at December 31, 2003 (1) |
$ | 26,108 | $ | 53,500 | $ | (4,493 | ) | $ | — | $ | — | $ | (53,414 | ) | $ | (4,407 | ) | ||||||||||
| Member units issued in acquisition of self storage facilities (2) |
2,468 | 720 | — | — | — | — | 720 | ||||||||||||||||||||
| Member units issued in exchange for receivables (3) |
944 | 2,000 | — | — | — | — | 2,000 | ||||||||||||||||||||
| Members units issued to repay borrowings and related party payables (4) |
1,466 | 259 | — | — | — | — | 259 | ||||||||||||||||||||
| Member units granted to employees (5) |
— | 1,205 | — | — | — | — | 1,205 | ||||||||||||||||||||
| Member contributions (6) |
14,986 | 4,705 | — | — | — | — | 4,705 | ||||||||||||||||||||
| Redemption of units (7) |
(21 | ) | (223 | ) | — | — | — | — | (223 | ) | |||||||||||||||||
| Redemption of units in exchange for note payable (8) |
— | (3,700 | ) | — | — | — | — | (3,700 | ) | ||||||||||||||||||
| Redemption of units in exchange for land at book value (9) |
(846 | ) | — | </ | |||||||||||||||||||||||