Business Context and Reporting Period
This Form 8-K filing by U-Store-It Trust (Cubesmart) is dated February 13, 2007, with a report date of February 20, 2007. The filing addresses significant corporate governance changes, including the termination of a material employment agreement and the departure of key board members, triggered by an ongoing internal inquiry into potential violations of fiduciary duties and nonsolicitation obligations by the Amsdell family.
Key Financial Metrics and Estimates
The filing provides preliminary estimates for the fourth quarter and year ended December 31, 2006, noting that the audit is not yet complete due to the ongoing inquiry.
- Q4 2006 Estimated Loss Per Share: Approximately $(0.10) (fully diluted).
- Q4 2006 Estimated Funds from Operations (FFO) Per Share: Approximately $0.18 (fully diluted, adjusted for ~$0.28 real estate depreciation).
- Q4 2006 Adjusted FFO Per Share: Approximately $0.24 (excluding specific one-time charges).
- Material Charges Included in Estimates:
- ~$1.1 million for severance and noncash write-off of unamortized loan costs.
- ~$2.3 million for settlements of pre-IPO claims, management fee disputes regarding Rising Tide properties, professional fees for accounting/internal controls, and liability estimate changes.
- 2007 FFO Guidance: Affirmed at $1.11 to $1.21 per share.
The filing does not provide specific revenue, total profit, cash flow, debt, or liquidity figures for the period.
Material Changes and Corporate Events
Significant changes in leadership and agreements occurred effective February 2007:
- Termination of Employment Agreement: The agreement with Todd C. Amsdell (President of U-Store-It Development LLC) was terminated effective February 19, 2007. The agreement provided a base salary of at least $379,000 per annum.
- Board Departures:
- Robert J. Amsdell (Chairman) retired from the Board effective February 13, 2007, following a request by other board members. He cited dissatisfaction with company performance and a desire to pursue strategic alternatives, including a potential sale of the company.
- Barry L. Amsdell (Board Member) resigned effective February 20, 2007, to avoid perceived conflicts of interest.
- Leadership Appointment: William M. Diefenderfer III was appointed Chairman of the Board on February 14, 2007.
Outlook, Risks, and Management Commentary
The Company is delaying its Q4 2006 earnings release and conference call, originally scheduled for late February, to coincide with the filing of its Form 10-K on March 1, 2007. Management is conducting an inquiry into actions by the Amsdell family regarding nonsolicitation obligations and fiduciary duties. Robert J. Amsdell has publicly disagreed with the Company's view on these matters and expressed a preference for selling the Company to maximize shareholder value. The financial estimates provided are subject to risks associated with the ongoing inquiry and the completion of the 2006 audit.
Investor Verification Checklist
- Verify the final audited financial results for Q4 and FY 2006 upon the March 1, 2007 Form 10-K filing.
- Monitor the status and outcome of the internal inquiry into the Amsdell family's actions.
- Assess the impact of the ~$3.4 million in one-time charges on the Company's true operating performance.
- Confirm the Company's ability to meet the affirmed 2007 FFO guidance of $1.11 to $1.21 given the leadership transition and ongoing legal/accounting reviews.
- Watch for announcements regarding potential strategic alternatives or a sale of the Company as suggested by Robert J. Amsdell.