Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CONE > SEC Filings for CONE > Form 10-Q on 9-May-2014All Recent SEC Filings

Show all filings for CYRUSONE INC.

Form 10-Q for CYRUSONE INC.


9-May-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report on Form 10-Q (this "Quarterly Report"), together with other statements and information publicly disseminated by our company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions.
In particular, statements pertaining to our capital resources, portfolio performance, financial condition and results of operations contain certain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately,""intends," "plans" "estimates," or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) the geographic concentration of our data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; (ii) increased operating costs; (iii) difficulties in identifying properties to acquire and completing acquisitions; (iv) the significant competition in our industry and an inability to lease vacant space, renew existing leases or release space as leases expire; (v) lack of sufficient customer demand to realize expected returns on our investments to expand our property portfolio; (vi) decreased revenue from costs and disruptions associated with any failure of our physical infrastructure or services; (vii) our ability to lease available space to existing or new customers; (viii) our failure to obtain necessary outside financing; (ix) our failure to qualify as a REIT; (x) financial market fluctuations; (xi) changes in real estate and zoning laws and increases in real property tax rates; (xii) delays or disruptions in third-party network connectivity; (xiii) service failures or price increases by third party power suppliers; (xiv) inability to renew net leases on the data center properties we lease; and (xv) other factors affecting the real estate industry generally. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this Quarterly Report. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the United States Securities and Exchange Commission, or SEC, pursuant to the Exchange Act. We discussed a number of material risks in Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2013. Those risks continue to be relevant to our performance and financial condition. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Presentation
References in this Quarterly Report to "Successor" refers to the Company on or after January 24, 2013 and "Predecessor" are the results prior to January 24, 2013. The Predecessor results have been prepared on a "carve-out" basis from CBI's
consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to the data center business. These allocations reflect significant assumptions, and the combined financial statements do not fully reflect what the financial position, results of operations and cash flows would have been had CyrusOne been a stand-alone company during the periods presented. As a result, historical financial information is not necessarily indicative of CyrusOne's future results of operations, financial position and cash flows. The related financial statement tables will be presented showing the statements that relate to the Predecessor as well as the Successor. The results of both the Predecessor and Successor are presented separately but will be discussed on a combined basis for comparability purposes.


Table of Contents

Overview
Our Company. We are an owner, operator and developer of enterprise-class, carrier-neutral data center properties. Enterprise-class, carrier-neutral data centers are purpose-built facilities with redundant power, cooling and access to a range of telecommunications carriers. We provide mission-critical data center facilities that protect and ensure the continued operation of information technology ("IT") infrastructure for approximately 630 customers in 25 operating data centers in 10 distinct markets (8 cities in the U.S., London and Singapore).
We provide mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for our customers. Our goal is to be the preferred global data center provider to the Fortune 1000. As of March 31, 2014, our customers included nine of the Fortune 20 and 135 of the Fortune 1000 or private or foreign enterprises of equivalent size. These 135 Fortune 1000 customers provided 74% of our annualized rent as of March 31, 2014. Additionally, as of March 31, 2014, our top 10 customers represented 42% of our annualized rent.
We cultivate long-term strategic relationships with our customers and provide them with solutions for their data center facilities and IT infrastructure challenges. Our offerings provide flexibility, reliability and security delivered through a tailored, customer service focused platform that is designed to foster long-term relationships. We focus on attracting customers that have not historically outsourced their data center needs and providing them with solutions that address their current and future needs. Our facilities and construction design allow us to offer flexibility in density, power resiliency and the opportunity for expansion as our customers' needs grow. The National IX Platform delivers interconnection across states and between metro-enabled sites within the CyrusOne footprint and beyond. The platform enables high-performance, low-cost data transfer and accessibility for customers by uniting all of our data centers.
Our Portfolio. As of March 31, 2014, our property portfolio included 25 operating data centers in 10 distinct markets (8 cities in the U.S., London and Singapore) collectively providing approximately 2,060,000 net rentable square feet ("NRSF"), of which 83% was leased, and powered by approximately 169 MW of available UPS capacity. We own 14 of the buildings in which our data center facilities are located. We lease the remaining 11 buildings, which account for approximately 375,000 NRSF, or approximately 18% of our total operating NRSF. These leased buildings accounted for 24% of our total annualized rent as of March 31, 2014. We also currently have 761,000 NRSF under development, as well as 569,000 NRSF of additional powered shell space under roof available for development. In addition, we have approximately 200 acres of land that are available for future data center shell development. Along with our primary product offering, leasing of colocation space, our customers are increasingly interested in ancillary office and other space. We believe our existing operating portfolio and development pipeline will allow us to meet the evolving needs of our existing customers and continue to attract new customers. The following tables provide an overview of our operating and development properties as of March 31, 2014.


Table of Contents

                                 CyrusOne Inc.
                             Data Center Portfolio
                              As of March 31, 2014
                                  (Unaudited)

                                                                                                 Operating Net Rentable Square Feet (NRSF)(a)
                                                                                                                                                                                  Powered
                                                                                                                                                                                  Shell
                                                                                                                               Office &                                          Available
                                                                  Colocation                                                     Other                                          for Future
                                    Metro        Annualized         Space                              CSF         Office &     Leased         Supporting                       Development       Available UPS
Facilities                          Area           Rent(b)         (CSF)(c)      CSF Leased(d)     Utilized(e)     Other(f)       (g)       Infrastructure(h)     Total(i)       (NRSF)(j)      Capacity  (MW)(k)
Westway Park Blvd. (Houston West
1)                               Houston       $  51,815,783        112,133             97 %             97 %       10,563          98 %              37,063       159,759           3,000                    28
Southwest Fwy. (Galleria)        Houston          40,167,850         63,469             92 %             92 %       17,259          69 %              23,203       103,931               -                    14
S. State Hwy 121 Business
(Lewisville)*                    Dallas           37,927,019        108,687             97 %             97 %       11,279          96 %              59,345       179,311               -                    18
West Seventh Street (7th St.)*** Cincinnati       34,442,528        211,718             90 %             91 %        5,744         100 %             171,561       389,023          37,000                    13
Fujitec Drive (Lebanon)          Cincinnati       21,001,479         65,303             79 %             79 %       36,261          90 %              49,159       150,723          72,000                    14
Westover Hills Blvd. (San
Antonio 1)                       San Antonio      16,437,632         43,487            100 %            100 %        5,633          85 %              45,939        95,058          11,000                    12
W. Frankford Road (Carrollton)   Dallas           15,339,297        107,616             69 %            100 %       19,706          20 %              53,588       180,910         345,000                     9
Industrial Road (Florence)       Cincinnati       14,721,210         52,698            100 %            100 %       46,848          87 %              40,374       139,920               -                     9
Knightsbridge Drive (Hamilton)*  Cincinnati       11,275,885         46,565             89 %             89 %        1,077         100 %              35,336        82,978               -                    10
E. Ben White Blvd. (Austin 1)*   Austin            6,776,994         16,223             85 %             86 %       21,376         100 %               7,516        45,115               -                     2
Parkway Dr. (Mason)              Cincinnati        5,833,599         34,072            100 %            100 %       26,458          98 %              17,193        77,723               -                     4
Metropolis Drive (Austin 2)      Austin            5,432,430         37,780             76 %             77 %        4,128          17 %              18,444        60,352               -                     5
Midway Rd.**                     Dallas            5,397,862          8,390            100 %            100 %            -           -                     -         8,390               -                     1
South Ellis Street (Phoenix 1)   Phoenix           5,207,640         77,504             88 %             93 %       37,040           7 %              32,723       147,267          31,000                    11
Westway Park Blvd. (Houston West
2)                               Houston           4,544,037         79,492             36 %             42 %        3,112          31 %              30,597       113,201          12,000                    12
Kestral Way (London)**           London            3,460,588         10,000             99 %             99 %            -           -                     -        10,000               -                     1
Springer Street (Lombard)        Chicago           2,403,080         13,516             47 %             50 %        4,115         100 %              12,230        29,861          29,000                     3
Marsh Ln.**                      Dallas            2,100,163          4,245            100 %            100 %            -           -                     -         4,245               -                     1
Goldcoast Drive (Goldcoast)      Cincinnati        1,463,036          2,728            100 %            100 %        5,280         100 %              16,481        24,489          14,000                     1
E. Monroe Street (Monroe St.)    South Bend        1,039,540          6,350             64 %             64 %            -           -                 6,478        12,828           4,000                     1
Bryan St.**                      Dallas              976,533          3,020             57 %             57 %            -           -                     -         3,020               -                     1
North Fwy. (Greenspoint)**       Houston             837,564         13,000            100 %            100 %        1,449         100 %                   -        14,449               -                     1
Crescent Circle (Blackthorn)*    South Bend          668,887          3,432             49 %             49 %            -           -                 5,125         8,557          11,000                     1
McAuley Place (Blue Ash)*        Cincinnati          620,448          6,193             39 %             39 %        6,950         100 %               2,166        15,309               -                     1
Jurong East (Singapore)**        Singapore           307,680          3,200             12 %             12 %            -           -                     -         3,200               -                     1
Total                                          $ 290,198,764      1,130,821             84 %             89 %      264,278          72 %             664,521     2,059,619         569,000                   169

* Indicates properties in which we hold a leasehold interest in the building shell and land. All data center infrastructure has been constructed by us and owned by us.

** Indicates properties in which we hold a leasehold interest in the building shell, land, and all data center infrastructure.

*** The information provided for the West Seventh Street (7th St.) property includes data for two facilities, one of which we lease and one of which we own.


Table of Contents

(a) Represents the total square feet of a building under lease or available for lease based on engineers' drawings and estimates but does not include space held for development or space used by CyrusOne.

(b) Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2014, multiplied by 12. For the month of March 2014, our total annualized rent was $290.2 million, customer reimbursements were $30.6 million annualized and consisted of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2012 through March 31, 2014, customer reimbursements under leases with separately metered power constituted between 8.6% and 10.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2014 was $301,286,789. Our annualized effective rent was greater than our annualized rent as of March 31, 2014 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.

(c) CSF represents the NRSF at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.

(d) Percent leased is determined based on CSF being billed to customers under signed leases as of March 31, 2014 divided by total CSF. Leases signed but not commenced as of March 2014 are not included.

(e) Utilization is calculated by dividing CSF under signed leases for colocation space (whether or not the customer has occupied the space) by total CSF.

(f) Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than CSF, which is typically office and other space.

(g) Percent leased is determined based on Office & Other space being billed to customers under signed leases as of March 31, 2014 divided by total Office & Other space. Leases signed but not commenced as of March 2014 are not included.

(h) Represents infrastructure support space, including mechanical, telecommunications and utility rooms, as well as building common areas.

(i) Represents the NRSF at an operating facility that is currently leased or readily available for lease. This excludes existing vacant space held for development.

(j) Represents space that is under roof that could be developed in the future for operating NRSF, rounded to the nearest 1,000.

(k) UPS capacity (also referred to as critical load) represents the aggregate power available for lease and exclusive use by customers from the facility's installed universal power supplies (UPS) expressed in terms of megawatts. The capacity reported is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels. Does not sum to total due to rounding.

                                 CyrusOne Inc.
                             NRSF Under Development
                              As of March 31, 2014
                             (Dollars in millions)
                                  (Unaudited)

                                                                                   NRSF Under Development(a)                                                             Under Development Costs(b)
                                     Metropolitan   Colocation Space                          Supporting                                           UPS MW        Actual to   Estimated Costs to
Facilities                               Area            (CSF)           Office & Other     Infrastructure     Powered  Shell(c)      Total      Capacity(d)      Date(e)        Completion        Total
W. Frankford Rd., Carrollton, TX
(Carrollton)                         Dallas                  60,000              8,000             28,000                     -      96,000             9.0     $        9               $17-22       $26-31
Westover Hills Blvd., San Antonio,
TX (San Antonio 2)                   San Antonio             30,000             20,000             25,000                40,000     115,000             3.0              3                29-35        32-38
Westway Park Blvd., Houston, TX
(Houston West 3)                     Houston                      -                  -                  -               320,000     320,000               -              1                18-24        19-25
South Ellis Street, Chandler, AZ
(Phoenix 1)                          Phoenix                      -                  -                  -                     -           -             5.0              3                  1-3          4-6
South Ellis Street, Chandler, AZ
(Phoenix 2)                          Phoenix                      -                  -                  -               110,000     110,000               -              -                14-17        14-17
Ridgetop Circle, Sterling, VA
(Northern VA)                        Loudon County           30,000              5,000             30,000                50,000     115,000             6.0              -                36-44        36-44
Metropolis Dr., Austin, TX (Austin
2)                                   Austin                   5,000                  -                  -                     -       5,000               -              -              0.5-1.0      0.5-1.0
Total                                                       125,000             33,000             83,000               520,000     761,000            23.0     $       16         $115.5-146.0 $131.5-162.0

(a) Represents NRSF at a facility for which activities have commenced or are expected to commence in the next 2 quarters to prepare the space for its intended use. Estimates and timing are subject to change.

(b) Represents management's estimate of the total costs required to complete the current NRSF under development. There may be an increase in costs if customers require greater power density.

(c) Represents NRSF under construction that, upon completion, will be powered shell available for future development into operating NRSF.

(d) UPS Capacity (also referred to as critical load) represents the aggregate power available for lease to and exclusive use by customers from the facility's installed universal power supplies (UPS) expressed in terms of megawatts. The capacity presented is for non-redundant megawatts, as we can develop flexible solutions to our customers at multiple resiliency levels.

(e) Capex-to-date is the cash investment as of March 31, 2014. There may be accruals above this amount for work completed, for which cash has not yet been paid.


Table of Contents

Our portfolio is currently leased to 630 companies, many of which are leading global companies. The following table sets forth information regarding the 20 largest customers, including their affiliates, in our portfolio based on annualized rent as of March 31, 2014:

                                 CyrusOne Inc.
                          Customer Diversification(a)
                              As of March 31, 2014
                                  (Unaudited)

                                                                                              Weighted
                                                                          Percentage of        Average
                                                                            Portfolio         Remaining
                                           Number of     Annualized        Annualized       Lease Term in
        Principal Customer Industry        Locations       Rent(b)           Rent(c)          Months(d)
1   Energy                                     2       $  21,861,473             7.5 %              35.7
2   Telecommunications (CBI)(e)                7          21,663,246             7.5 %              27.0
3   Energy                                     4          14,959,172             5.2 %              11.5
4   Research and Consulting Services           3          14,378,451             5.0 %              28.3
5   Information Technology                     3          13,758,183             4.7 %              54.2
6   Telecommunication Services                 1          11,796,422             4.1 %              48.4
7   Information Technology                     3           7,860,317             2.7 %              41.8
8   Financials                                 1           6,000,225             2.1 %              77.0
9   Telecommunication Services                 5           5,045,249             1.7 %              64.0
10  Information Technology                     1           4,784,682             1.6 %              24.0
11  Energy                                     2           4,756,800             1.6 %              31.0
12  Consumer Staples                           1           4,618,912             1.6 %             100.0
13  Information Technology                     1           4,517,495             1.6 %              86.0
14  Energy                                     1           4,215,473             1.5 %              15.0
15  Information Technology                     2           3,861,445             1.3 %              86.9
16  Energy                                     3           3,854,351             1.3 %              11.9
17  Energy                                     1           3,636,639             1.3 %              29.3
18  Consumer Discretionary                     1           3,405,963             1.2 %              10.3
19  Energy                                     1           3,341,994             1.2 %              13.3
20  Energy                                     3           3,300,472             1.1 %              32.9
                                                       $ 161,616,964            55.8 %              38.5

(a) Includes affiliates.

(b) Represents monthly contractual rent (defined as cash rent including customer reimbursements for metered power) under existing customer leases as of March 31, 2014, multiplied by 12. For the month of March 2014, our total annualized rent was $290.2 million, and customer reimbursements were $30.6 million annualized, consisting of reimbursements by customers across all facilities with separately metered power. Customer reimbursements under leases with separately metered power vary from month-to-month based on factors such as our customers' utilization of power and the suppliers' pricing of power. From April 1, 2012 through March 31, 2014, customer reimbursements under leases with separately metered power constituted between 8.6% and 10.6% of annualized rent. After giving effect to abatements, free rent and other straight-line adjustments, our annualized effective rent as of March 31, 2014 was $301,286,789. Our annualized effective rent was greater than our annualized rent as of March 31, 2014 because our positive straight-line and other adjustments and amortization of deferred revenue exceeded our negative straight-line adjustments due to factors such as the timing of contractual rent escalations and customer prepayments for services.

(c) Represents the customer's total annualized rent divided by the total annualized rent in the portfolio as of March 31, 2014, which was approximately $290.2 million.

. . .

  Add CONE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CONE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.