Market Overview

Life Storage, Inc. Reports Second Quarter 2018 Results; Raises 2018 Full Year Guidance

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Life
Storage, Inc
. (NYSE:LSI), a leading national owner and operator of
self storage facilities, reported operating results for the quarter
ended June 30, 2018.

The Company achieved net income attributable to common shareholders in
the second quarter of 2018 of $39.3 million or $0.84 per fully diluted
common share. This compares to net income attributable to common
shareholders of $19.4 million in the second quarter of 2017, or $0.42
per fully diluted common share.

Funds from operations ("FFO")(1) for the quarter were $1.39
per fully diluted common share compared to $1.24 for the same period
last year. Absent acquisition fee income and legal costs incurred in the
second quarter of 2017, adjusted FFO per fully diluted common share was
$1.39 and $1.33 for the quarters ended June 30, 2018 and 2017,
respectively.

"The solid contribution of the legacy Life Storage stores to the same
store pool, the resilience of the fundamentals in a number of our key
markets, and our growing joint venture and third-party management
initiatives is very encouraging," commented CEO David Rogers. "We're
also excited about the successful launch of Rent Now and further
penetration into our commercial customer base. Our focus on consistently
strengthening our platforms, supported by our strong balance sheet,
provides us with the ability to grow long-term shareholder value,"
concluded Mr. Rogers.

Highlights for the 2nd
Quarter Included
:

  • Increased same store revenue by 4.0% and same store net operating
    income ("NOI")(2) by 5.2% as compared to the
    second quarter of 2017.
  • Grew same store average occupancy for the quarter by 20 basis points
    to 91.9%.
  • Improved organic search engine visibility for the Life Storage brand,
    thus reducing internet marketing expense by 12.1%.
  • Achieved adjusted funds from operations per fully diluted common share
    of $1.39, a 4.5% increase over the same period last year.
  • Added seven stores to its third-party management platform; the Company
    now manages a total of 152 properties through its joint venture and
    third-party management agreements.
  • Increased management fee income by 31.1% over that of the second
    quarter of 2017.
  • Launched the Company's "Rent Now" initiative, where customers are able
    to ‘skip the counter' and complete the rental process online.
  • Paid a quarterly dividend of $1.00 per share of common stock.

OPERATIONS:

Total revenues increased 3.9% over second quarter 2017 while operating
costs increased 2.7%, resulting in an NOI increase of 4.5%.

Revenues for the 535 stabilized stores wholly owned by the Company since
December 31, 2016 increased 4.0% from those of the second quarter of
2017, the result of a 20 basis point increase in average occupancy and a
3.4% increase in rental rates.

The Company achieved same store revenue growth in 29 of the 33 major
markets in its same store pool, with all 33 markets maintaining an
average quarterly occupancy greater than 90%. Markets with the strongest
positive revenue impact included Las Vegas, NV; Houston/Beaumont, TX;
California (Northern and Southern); New York/New Jersey; and
Buffalo-Upstate New York.

Same store operating expenses increased 1.5% for the second quarter of
2018 compared to the prior year period. Increased real estate taxes and
payroll and benefits were partially offset by a 12.1% decrease in
internet marketing costs. Consequently, same store NOI for the period
increased 5.2% over the second quarter of 2017.

General and administrative expenses decreased by approximately $4.2
million over the same period in 2017. Absent expenses associated with
the Company's name change and legal proceedings in 2017, general and
administrative costs would have increased approximately $0.9 million
driven primarily by increased incentive compensation.

PROPERTIES:

During the quarter, the Company added seven properties to its
third-party management platform. It now manages a total of 152
properties through its joint venture and third-party management
agreements. It has an additional 24 properties under contract to manage
commencing in 2018 and 2019, two of which opened subsequent to quarter
end. Twenty of the remaining 22 contracts are new developments.

In July, the Company sold one property in Austin, TX for $10.0 million;
the property remains under Life Storage management.

Also subsequent to the end of the quarter, the Company entered into
contracts to acquire three stores for its own portfolio for a total
consideration of approximately $28 million. The facilities are located
in markets where the Company already has a presence: Boston, MA;
Atlanta, GA; and Greater NYC. The Company currently manages the Boston,
MA and Atlanta, GA locations. These pending acquisitions are subject to
further due diligence and closing conditions; therefore no assurance can
be given that these properties will be purchased according to the terms
described.

CAPITAL STRUCTURE AND LIQUIDITY:

Illustrated below are key financial ratios at June 30, 2018:

  • Debt to Enterprise Value (at $97.31/share) 27.8%
  • Debt to Book Cost of Storage Facilities 40.3%
  • Debt to Recurring Annualized EBITDA 5.4x
  • Debt Service Coverage 4.8x

At June 30, 2018, the Company had approximately $7.3 million of cash on
hand, and $386 million available on its line of credit.

During the quarter, the Company filed a prospectus supplement with the
Securities and Exchange Commission under which it may sell shares of its
common stock having an aggregate gross sales price of up to $300 million
through an "at-the-market" (ATM) offering program. No shares were issued
under the ATM during the quarter.

COMMON STOCK DIVIDEND:

Subsequent to quarter-end, the Company's Board of Directors approved a
quarterly dividend of $1.00 per share or $4.00 annualized.

YEAR 2018 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in
formulating guidance for the third quarter and full year 2018:

     

Same Store

Projected Increases Over 2017

3Q 2018

   

FY 2018

Revenue 2.75 – 3.25% 2.50 – 3.25%
Operating Costs (excluding property taxes) 1.00 – 2.00% 0.75 – 1.50%
Property Taxes 5.50 – 6.50% 5.50 – 6.50%
Total Operating Expenses 2.50 – 3.50% 2.25 – 3.00%
Net Operating Income 2.75 – 3.25% 2.75 – 3.25%
 

The Company's 2018 same store pool consists of the 535 stabilized stores
owned since December 31, 2016, which includes the stabilized legacy Life
Storage locations. The stores purchased between 2015 and 2017 at
certificate of occupancy or that were in the early stages of lease-up
are not included, regardless of their current occupancies. The Company
believes that occupancy levels achieved during the lease-up period,
using discounted rates, are not truly indicative of a new store's
performance, and therefore do not result in a meaningful year-over-year
comparison in future years. The Company will include such stores in its
same store pool in the second year after the stores achieve 80%
sustained occupancy using market rates and incentives.

The Company plans to complete $45 – $50 million of expansions in 2018.
It also has budgeted $21 - $24 million to provide for recurring
capitalized expenditures including roofing, paving, and office
renovations.

The Company has not yet closed any acquisitions in 2018. Should any
acquisitions or joint venture investments occur, they are expected to be
funded by free cash flow and draws on its line of credit, which carries
an interest rate of Libor plus 1.10%.

As of June 30, 2018, the Company operated 22 self storage facilities
that it acquired between 2015 - 2017 upon issuance of certificate of
occupancy or in the early stages of lease-up. These properties are
expected to contribute above average revenue growth in 2018.

Annual general and administrative expenses are expected to be
approximately $45 – $46 million.

The Company experienced two unique situations in the second half of 2017
that impacted same store performance: (i) Houston and Beaumont, TX
benefited from elevated occupancy levels after Hurricane Harvey, and to
a lesser extent, parts of Florida also experienced occupancy gains due
to Hurricane Irma; and (ii) higher internet marketing spend associated
with the brand conversion to Life Storage. Guidance has been adjusted to
account for the Company's solid performance in the first half of 2018,
and the estimates continue to include normalized seasonal occupancy in
the 2017 hurricane-affected markets, and reduced marketing spend.

As a result of the above assumptions, management expects adjusted funds
from operations for the full year 2018 to be approximately $5.42 to
$5.48 per share, and between $1.40 and $1.44 per share for the third
quarter of 2018.

         
Reconciliation of Guidance

3Q 2018

Range or Value

FY 2018

Range or Value

Earnings per share attributable to common shareholders - diluted

$

0.85 - $ 0.89

$

3.19 - $ 3.25

Plus: real estate depreciation and amortization  

0.55 - 0.55

 

2.23 - 2.23

FFO per share $ 1.40 - $ 1.44 $ 5.42 - $ 5.48
 

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 21E of the
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 enter new
markets where it has little or no operational experience; 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 Company's ability to comply with debt covenants;
the future ratings on the Company's debt instruments; 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 reliance on its call center; the Company's cash flow may be
insufficient to meet required payments of principal, interest and
dividends; and tax law changes which may change the taxability of future
income.

CONFERENCE CALL:

Life Storage will hold its Second Quarter Earnings Release Conference
Call at 9:00 a.m. Eastern Time on Thursday, August 2, 2018. To help
avoid connection delays, participants are encouraged to pre-register
using this
link
. Anyone unable to pre-register may access the conference call
at 877.737.7051 (domestic), or 201.689.8878 (international). Management
will accept questions from registered financial analysts after prepared
remarks; all others are encouraged to listen to the call via webcast by
accessing the investor relations tab at lifestorage.com
or at http://www.investorcalendar.com/event/33708.

The webcast will be archived for 90 days; a telephone replay will also
be available for 72 hours by calling 877.481.4010 and entering
conference ID 33708.

ABOUT LIFE STORAGE, INC:

Life
Storage, Inc.
is a self-administered and self-managed equity REIT
that is in the business of acquiring and managing self storage
facilities. Located in Buffalo, New York, the Company operates more than
700 storage facilities in 28 states. The Company serves both residential
and commercial storage customers with storage units rented by month.
Life Storage consistently provides responsive service to its
400,000-plus customers, making it a leader in the industry. For more
information visit https://invest.lifestorage.com/.

         
Life Storage, Inc.
Balance Sheet Data
(unaudited)
 
June 30, December 31,
(dollars in thousands)       2018     2017
Assets
Investment in storage facilities:
Land $ 786,628 $ 786,628
Building, equipment and construction in progress   3,560,756     3,534,782  
4,347,384 4,321,410
Less: accumulated depreciation   (671,717 )   (624,314 )
Investment in storage facilities, net 3,675,667 3,697,096
Cash and cash equivalents 7,327 9,167
Accounts receivable 7,935 7,331
Receivable from joint ventures 994 1,397
Investment in joint ventures 133,225 133,458
Prepaid expenses 16,657 6,757
Trade name 16,500 16,500
Fair value of interest rate swap agreements 177 205
Other assets   4,487     4,863  
Total Assets $ 3,862,969   $ 3,876,774  
 
Liabilities
Line of credit $ 113,000 $ 105,000
Term notes, net 1,610,062 1,609,089
Accounts payable and accrued liabilities 83,254 92,941
Deferred revenue 10,080 9,374
Mortgages payable   12,489     12,674  
Total Liabilities 1,828,885 1,829,078
 
Noncontrolling redeemable Operating Partnership Units at redemption
value
20,644 19,373
 
Equity
Common stock 466 466
Additional paid-in capital 2,368,942 2,363,171
Accumulated deficit (348,764 ) (327,727 )
Accumulated other comprehensive loss   (7,204 )   (7,587 )
Total Shareholders' Equity   2,013,440     2,028,323  
Total Liabilities and Shareholders' Equity $ 3,862,969   $ 3,876,774  
 

                 
Life Storage, Inc.
Consolidated Statements of Operations
(unaudited)
April 1, 2018 April 1, 2017 January 1, 2018 January 1, 2017
to to to to
(dollars in thousands, except share data) June 30, 2018     June 30, 2017 June 30, 2018     June 30, 2017
 
Revenues
Rental income $ 125,892 $ 120,646 $ 247,516 $ 239,240
Other operating income 9,570 8,955 18,645 16,864
Management and acquisition fee income   2,546     3,183     4,941     5,001  
Total operating revenues 138,008 132,784 271,102 261,105
 
Expenses
Property operations and maintenance 29,787 29,719 60,236 59,515
Real estate taxes 15,643 14,498 31,061 28,933
General and administrative 11,728 15,959 23,771 27,396
Operating leases of storage facilities 141 141 283 141
Depreciation and amortization 24,784 26,186 49,548 51,050
Amortization of in-place customer leases   -     11,919     -     24,697  
Total operating expenses   82,083     98,422     164,899     191,732  
 
Income from operations 55,925 34,362 106,203 69,373
 
Other income (expense)
Interest expense (A) (17,518 ) (15,716 ) (34,722 ) (30,926 )
Interest income 2 1 6 4
Equity in income of joint ventures   1,048     785     2,020     1,506  
 
Net income 39,457 19,432 73,507 39,957
Noncontrolling interests in the Operating Partnership   (183 )   (77 )   (344 )   (172 )
Net income attributable to common shareholders $ 39,274   $ 19,355   $ 73,163   $ 39,785  
 
Earnings per common share attributable to common shareholders -
basic
$ 0.84   $ 0.42   $ 1.57   $ 0.86  
 
Earnings per common share attributable to common shareholders -
diluted
$ 0.84   $ 0.42   $ 1.57   $ 0.86  
 
Common shares used in basic
earnings per share calculation 46,480,907 46,364,890 46,466,700 46,334,729
 
Common shares used in diluted
earnings per share calculation 46,576,352 46,477,680 46,556,512 46,448,286
 
Dividends declared per common share $ 1.00   $ 1.00   $ 2.00   $ 1.95  
 
 
(A) Interest expense for the period ending June 30 consists of
the following
Interest expense $ 16,993 $ 15,196 $ 33,673 $ 29,887
Amortization of debt issuance costs   525     520     1,049     1,039  
Total interest expense $ 17,518   $ 15,716   $ 34,722   $ 30,926  
 

                 
Life Storage, Inc.
Computation of Funds From Operations (FFO) (1)
(unaudited)
April 1, 2018 April 1, 2017 January 1, 2018 January 1, 2017
to to to to
(dollars in thousands, except share data)       June 30, 2018     June 30, 2017 June 30, 2018     June 30, 2017
 
Net income attributable to common shareholders $ 39,274 $ 19,355 $ 73,163 $ 39,785
Noncontrolling interests in the Operating Partnership 183 77 344 172
Depreciation of real estate and amortization of intangible
assets exclusive of debt issuance costs 24,270 37,708 48,526 74,973
Depreciation and amortization from unconsolidated joint ventures 1,234 948 2,430 1,716
Funds from operations allocable to noncontrolling
interest in Operating Partnership   (302 )   (229 )   (582 )   (502 )
Funds from operations available to common shareholders   64,659     57,859     123,881     116,144  
FFO per share - diluted $ 1.39 $ 1.24 $ 2.66 $ 2.50
 
Adjustments to FFO
Loss related to legal settlement - 5,040 - 5,040
Acquisition fee income - (1,241 ) - (1,241 )
Board changes and other proxy related expenses - - 1,128 -
Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership   -     (15 )   (5 )   (15 )
Adjusted funds from operations available to common shareholders   64,659     61,643     125,004     119,928  
Adjusted FFO per share - diluted $ 1.39 $ 1.33 $ 2.68 $ 2.58
 
Common shares - diluted 46,576,352 46,477,680 46,556,512 46,448,286
 

                 
Life Storage, Inc.
Computation of Net Operating Income (2)
(unaudited)
April 1, 2018 April 1, 2017 January 1, 2018 January 1, 2017
to to to to
(dollars in thousands)       June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017
 
Net Income $ 39,457 $ 19,432 $ 73,507 $ 39,957
General and administrative 11,728 15,959 23,771 27,396
Payments for rent 141 141 283 141
Depreciation and amortization 24,784 38,105 49,548 75,747
Interest expense 17,518 15,716 34,722 30,926
Interest income (2) (1) (6) (4)
Equity in income of joint ventures (1,048) (785) (2,020) (1,506)
Net operating income $ 92,578 $ 88,567 $ 179,805 $ 172,657
 
Same store $ 85,868 $ 81,634 $ 166,806 $ 160,625
Other stores and management fee inc income 6,710 6,933 12,999 12,032
Total net operating income $ 92,578 $ 88,567 $ 179,805 $ 172,657
 

                 
Life Storage, Inc.
Quarterly Same Store Data (3) 535 mature
stores owned since 12/31/16
(unaudited)
April 1, 2018 April 1, 2017
to to Percentage
(dollars in thousands)       June 30, 2018     June 30, 2017 Change     Change
 
Revenues:
Rental income $ 120,196 $ 115,263 $ 4,933 4.3 %
Revenues related to tenant insurance 4,710 4,566 144 3.2 %
Other operating income   1,926   2,154   (228 ) -10.6 %
Total operating revenues 126,832 121,983 4,849 4.0 %
 
Expenses:
Payroll and benefits 10,262 10,115 147 1.5 %
Real estate taxes 14,378 13,539 839 6.2 %
Utilities 3,607 3,545 62 1.7 %
Repairs and maintenance 4,297 4,339 (42 ) -1.0 %
Office and other operating expense 3,958 4,042 (84 ) -2.1 %
Insurance 1,487 1,420 67 4.7 %
Advertising 326 335 (9 ) -2.7 %
Internet marketing   2,649   3,014   (365 ) -12.1 %
Total operating expenses   40,964   40,349   615   1.5 %
 
Net operating income (2) $ 85,868 $ 81,634 $ 4,234   5.2 %
 
 
QTD Same store move ins 55,827 58,440 (2,613 )
 
QTD Same store move outs 50,304 50,016 288
 
 
Other Comparable Quarterly Same Store Data
(unaudited)
April 1, 2018 April 1, 2017
to to Percentage
June 30, 2018 June 30, 2017 Change Change
Stores owned since 12/31/15 (430 stores)
Revenues $ 97,333 $ 94,248 $ 3,085 3.3 %
Expenses   31,358   30,816   542   1.8 %
Net operating income $ 65,975 $ 63,432 $ 2,543   4.0 %
 
 
Stores owned since 12/31/14 (412 stores)
Revenues $ 93,144 $ 90,179 $ 2,965 3.3 %
Expenses   29,882   29,384   498   1.7 %
Net operating income $ 63,262 $ 60,795 $ 2,467   4.1 %
 

                 
Life Storage, Inc.
Year to Date Same Store Data (3) 535
mature stores owned since 12/31/16
(unaudited)
January 1, 2018 January 1, 2017
to to Percentage
(dollars in thousands)       June 30, 2018     June 30, 2017 Change     Change
 
Revenues:
Rental income $ 236,390 $ 228,728 $ 7,662 3.3 %
Revenues related to tenant insurance 9,363 8,954 409 4.6 %
Other operating income   3,611   3,849   (238 ) -6.2 %
Total operating revenues 249,364 241,531 7,833 3.2 %
 
Expenses:
Payroll and benefits 20,806 20,343 463 2.3 %
Real estate taxes 28,756 27,079 1,677 6.2 %
Utilities 7,682 7,323 359 4.9 %
Repairs and maintenance 9,000 9,279 (279 ) -3.0 %
Office and other operating expense 8,140 8,058 82 1.0 %
Insurance 2,930 2,785 145 5.2 %
Advertising 658 672 (14 ) -2.1 %
Internet marketing   4,586   5,367   (781 ) -14.6 %
Total operating expenses   82,558   80,906   1,652   2.0 %
 
Net operating income (2) $ 166,806 $ 160,625 $ 6,181   3.8 %
 
 
YTD Same store move ins 104,267 108,868 (4,601 )
 
YTD Same store move outs 97,007 96,898 109
 

                 
Life Storage, Inc.
Other Data - unaudited Same Store (3) All Stores (4)

2018

2017

2018

2017

 
Weighted average quarterly occupancy 91.9 % 91.7 % 91.5 % 90.9 %
 
Occupancy at June 30 92.4 % 92.5 % 92.1 % 91.9 %
 
Rent per occupied square foot $ 13.86 $ 13.41 $ 13.81 $ 13.36
 
 

Investment in Storage Facilities: (unaudited)

The following summarizes activity in storage facilities during the
six months ended June 30, 2018:
 
Beginning balance $ 4,321,410
Property acquisitions -
Improvements and equipment additions:
Expansions 3,197
Roofing, paving, and equipment:
Stabilized stores 10,926
Change in construction in progress (Total CIP $28.4 million) 14,040
Dispositions and Impairments   (2,189 )
Storage facilities at cost at period end $ 4,347,384  
 

         
Life Storage, Inc.
Other Data - unaudited (continued)
 
 

Comparison of Selected G&A Costs (unaudited)

Quarter Ended

June 30, 2018

June 30, 2017

 
Management and administrative salaries and benefits 6,908 6,381
Training 211 252
Call center 753 721
Life Storage Solutions costs 196 134
Income taxes 720 429
Legal, accounting and professional 1,005 1,071
Name change - 79
Loss related to legal settlement - 5,040
Other administrative expenses (5) 1,934 1,852
$ 11,727 $ 15,959
 
 

Net rentable square feet

June 30, 2018

Wholly owned properties 39,867,183
Joint venture properties 7,404,596
Third party managed properties 3,266,334
50,538,113
 

June 30, 2018

June 30, 2017

 
Common shares outstanding 46,599,927 46,565,213
Operating Partnership Units outstanding 215,009 217,481
(1) We believe that Funds from Operations ("FFO") provides relevant
and meaningful information about our operating performance that is
necessary, along with net earnings and cash flows, for an
understanding of our operating results. FFO adds back historical
cost depreciation, which assumes the value of real estate assets
diminishes predictably in the future. In fact, real estate asset
values increase or decrease with market conditions. Consequently, we
believe FFO is a useful supplemental measure in evaluating our
operating performance by disregarding (or adding back) historical
cost depreciation.
 
Funds from operations is defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") as net income available to
common shareholders computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains or losses on sales
of properties, plus impairment of real estate assets, 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.
 
(2) Net operating income or "NOI" is a non-GAAP (generally accepted
accounting principles) financial measure that we define as total
continuing revenues less continuing property operating expenses. NOI
also can be calculated by adding back to net income: interest
expense, impairment and casualty losses, depreciation and
amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from
discontinued operations, interest income, gain on sale of real
estate, and equity in income of joint ventures. We believe that NOI
is a meaningful measure to investors in evaluating our operating
performance, because we utilize NOI in making decisions with respect
to capital allocations, in determining current property values, and
comparing period-to-period and market-to-market property operating
results. Additionally, NOI is widely used in the real estate
industry and the self storage industry to measure the performance
and value of real estate assets without regard to various items
included in net income that do not relate to or are not indicative
of operating performance, such as depreciation and amortization,
which can vary depending on accounting methods and book value of
assets. NOI should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in
accordance with GAAP, such as total revenues, operating income and
net income.
 
(3) Includes the stores owned and/or managed by the Company for the
entire periods presented that are consolidated in our financial
statements. Does not include unconsolidated joint ventures or other
stores managed by the Company.
 
(4) Does not include unconsolidated joint venture stores or other
stores managed by the Company.
 
(5) Other administrative expenses include office rent, travel
expense, investor relations and miscellaneous other expenses.

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