Amendment #1 to Form 10-Q
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
Form 10-Q/A
 
Amendment No. 1
 
(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, 2002 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         0-25739            
 

 
WELLS REAL ESTATE INVESTMENT TRUST, INC.
(Exact name of registrant as specified in its charter)
 
Georgia
 
58-2328421
(State of other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
 
6200 The Corners Parkway, Suite 250, Norcross, Georgia
  
30092        
(Address of principal executive offices)
  
(Zip Code)            
 
(770) 449-7800
Registrant’s telephone number, including area code
 
 

(Former name, former address and former fiscal year, if changed since last report)
 
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  ¨
 


 
Explanatory Note: This Amendment No. 1 to the Form 10-Q of Wells Real Estate Investment Trust, Inc. (the “Company”) for the period ended June 30, 2002 amends the Form 10-Q previously filed by amending the Consolidated Statements of Income for the three and six months ended June 30, 2002 and Notes 1(k) and 2 to the Condensed Notes to Financial Statements and the “Results of Operations” subsection of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. This amendment is necessary in order to restate the presentation of certain operating costs of the Company reimbursed by tenants as revenue and the gross property operating costs as expenses pursuant to a FASB Emerging Issues Task Force release issued in November 2001. In addition, the comparative financial information for prior periods has been reclassified to conform with this revised presentation. Since this presentation does not impact the amount of reimbursements received by the Company or the property operating costs incurred and requires equal adjustments to revenues and expenses, the adoption of this guidance will have no impact on the financial position, net income, earnings per share or cash flows of the Company.

1


 
Item 1.    Financial Statements
 
Following is the amended and restated Consolidated Statements of Income for the three and six months ended June 30, 2002:
 
WELLS REAL ESTATE INVESTMENT TRUST, INC.
 
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF INCOME
 
(unaudited)
 
    
Three Months Ended

  
Six Months Ended

    
June 30,
2002

  
June 30,
2001

  
June 30,
2002

  
June 30,
2001

REVENUES:
                           
Rental income
  
$
21,833,652
  
$
9,851,167
  
$
38,571,815
  
$
19,711,252
Operating cost reimbursements*
  
 
4,761,880
  
 
1,576,878
  
 
9,176,799
  
 
3,139,187
Equity in income of joint ventures
  
 
1,271,863
  
 
809,481
  
 
2,478,686
  
 
1,519,194
Interest income
  
 
1,534,636
  
 
93,092
  
 
2,648,351
  
 
193,007
Take out fee
  
 
0
  
 
137,500
  
 
134,102
  
 
137,500
    

  

  

  

    
 
29,402,031
  
 
12,468,118
  
 
53,009,753
  
 
24,700,140
    

  

  

  

EXPENSES:
                           
Depreciation
  
 
7,158,830
  
 
3,206,638
  
 
12,903,282
  
 
6,393,817
Operating costs*
  
 
6,201,179
  
 
2,360,122
  
 
11,240,796
  
 
5,013,615
Management and leasing fees
  
 
1,003,587
  
 
552,188
  
 
1,903,082
  
 
1,117,902
Administrative costs
  
 
592,426
  
 
584,184
  
 
1,121,457
  
 
759,291
Interest expense
  
 
440,001
  
 
648,946
  
 
880,002
  
 
2,809,373
Amortization of deferred financing costs
  
 
249,530
  
 
77,142
  
 
424,992
  
 
291,899
    

  

  

  

    
 
15,645,553
  
 
7,429,220
  
 
28,473,611
  
 
16,385,897
    

  

  

  

NET INCOME
  
$
13,756,478
  
$
5,038,898
  
$
24,536,142
  
$
8,314,243
    

  

  

  

BASIC AND DILUTED EARNINGS PER SHARE
  
$
0.11
  
$
0.12
  
$
0.22
  
$
0.22
    

  

  

  

BASIC AND DILUTED WEIGHTED AVERAGE SHARES
  
 
126,037,819
  
 
42,192,347
  
 
110,885,641
  
 
38,328,405
    

  

  

  

 
See accompanying condensed notes to financial statements.
 
*These financial statement line items have been amended and restated as described in the accompanying Note 1(k).

2


 
Condensed Notes to Financial Statements
 
1.    Summary of Significant Accounting Policies
 
Following is new Note 1(k) to be inserted immediately following Note 1(j) in the Condensed Notes to Consolidated Financial Statements:
 
(k)    Reclassifications and Change in Presentation
 
The Company has historically reported property operating costs net of reimbursements from tenants as an expense in its Consolidated Statements of Income. These costs include property taxes, property insurance, utilities, repairs and maintenance, management fees and other expenses related to the ownership and operation of the Company’s properties that are required to be reimbursed by the properties’ tenants in accordance with the terms of their leases. In response to a FASB Emerging Issues Task Force release issued in November 2001, the Company will now present the reimbursements received from tenants as revenue and the gross property operating costs as expenses commencing in the first quarter of 2002. Consequently, the accompanying Consolidated Statements of Income for the three and six months ended June 30, 2002 has been amended and restated to reflect the effects of this revised presentation. In addition, the comparative financial information for prior periods has been reclassified to conform to the presentation in the 2002 financial statements.
 
Since this presentation does not impact the amount of reimbursements received or property operating costs incurred and requires equal adjustments to revenues and expenses, the adoption of this guidance will have no impact on the financial position, net income, earnings per share or cash flows of the Company.
 
2.    Investments in Joint Ventures
 
Following is the amended and restated Note 2(b) to the Condensed Notes to Consolidated Financial Statements:
 
(b)    Summary of Operations
 
The following information summarizes the results of operations of the unconsolidated joint ventures in which the Company, through Wells OP, had ownership interests as of June 30, 2002 and 2001, respectively. There were no additional investments in joint ventures made by the Company during the three and six months ended June 30, 2002.
 
    
Total Revenues

  
Net Income

  
Wells OP’s Share of Net Income

    
Three Months Ended

  
Three Months Ended

  
            Three Months Ended            

    
June 30,
2002

  
June 30,
2001

  
June 30,
2002

  
June 30,
2001

  
June 30,
2002

  
June 30,
2001

Fund IX-X-XI-REIT Joint Venture
  
$
1,440,053
  
$
1,543,260
  
$
619,173
  
$
734,418
  
$
22,982
  
$
27,258
Cort Joint Venture
  
 
209,306
  
 
198,881
  
 
140,206
  
 
131,374
  
 
61,224
  
 
57,367
Fremont Joint Venture
  
 
227,782
  
 
225,178
  
 
140,944
  
 
135,990
  
 
109,237
  
 
105,398
Fund XI-XII-REIT Joint Venture
  
 
884,655
  
 
859,228
  
 
545,009
  
 
499,960
  
 
309,363
  
 
283,792
Fund XII-REIT Joint Venture
  
 
1,487,902
  
 
1,250,417
  
 
852,672
  
 
587,864
  
 
468,646
  
 
310,812
Fund VIII-IX-REI T Joint Venture
  
 
310,228
  
 
320,931
  
 
147,998
  
 
155,320
  
 
23,370
  
 
24,854
Fund XIII-REIT Joint Venture
  
 
708,071
  
 
0
  
 
406,236
  
 
0
  
 
277,041
  
 
0
    

  

  

  

  

  

    
$
5,267,997
  
$
4,397,895
  
$
2,852,238
  
$
2,244,926
  
$
1,271,863
  
$
809,481
    

  

  

  

  

  

3


 
    
Total Revenues

  
Net Income

  
Wells OP’s Share of Net
Income

    
Six Months Ended

  
Six Months Ended

  
Six Months Ended

    
June 30,
2002

  
June 30,
2001

  
June 30,
2002

  
June 30,
2001

  
June 30,
2002

  
June 30,
2001

Fund IX-X-XI-REIT
Joint Venture
  
$
2,824,208
  
$
3,013,371
  
$
1,173,441
  
$
1,372,853
  
$
43,554
  
$
50,954
Cort Joint Venture
  
 
421,693
  
 
398,468
  
 
269,956
  
 
265,127
  
 
117,882
  
 
115,773
Fremont Joint Venture
  
 
453,224
  
 
452,370
  
 
276,892
  
 
278,602
  
 
214,602
  
 
215,928
Fund XI-XII-REIT
Joint Venture
  
 
1,745,688
  
 
1,715,006
  
 
1,042,158
  
 
1,014,237
  
 
591,560
  
 
575,710
Fund XII-REIT
Joint Venture
  
 
3,161,741
  
 
2,203,927
  
 
1,658,185
  
 
1,033,184
  
 
911,372
  
 
519,445
Fund VIII-IX-REIT
Joint Venture
  
 
634,908
  
 
588,555
  
 
308,694
  
 
260,352
  
 
48,744
  
 
41,384
Fund XIII-REIT Joint Venture
  
 
1,408,928
  
 
0
  
 
807,910
  
 
0
  
 
550,972
  
 
0
    

  

  

  

  

  

    
$
10,650,390
  
$
8,371,697
  
$
5,537,236
  
$
4,224,355
  
$
2,478,686
  
$
1,519,194
    

  

  

  

  

  

 
Total revenues for the three and six months ended June 30, 2002 presented above have been amended and restated to include operating cost reimbursements as revenue, consistent with the presentation described in Note 1(k).
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Following is the amended and restated “Results of Operations” section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations:
 
Results of Operations
 
As of June 30, 2002, the Company’s real estate properties were 100% leased to tenants. Gross revenues were $53,009,753 and $24,700,140 for the six months ended June 30, 2002 and 2001, respectively. Gross revenues for the six months ended June 30, 2002 and 2001 were attributable to rental income, operating cost reimbursements, interest income earned on funds held by the Company prior to the investment in properties, and income earned from joint ventures. The increase in revenues in 2002 was primarily attributable to the purchase of $259,535,578 in additional properties during 2002 and the purchase of $227,933,858 in additional properties during the second half of 2001 which were not owned for the full first half of 2001. The purchase of additional properties also resulted in an increase in expenses which totaled $28,473,611 for the six months ended June 30, 2002, as compared to $16,385,897 for the six months ended June 30, 2001. Expenses in 2002 and 2001 consisted primarily of depreciation, operating costs, interest expense, management and leasing fees and general and administrative costs. As a result, the Company’s net income also increased from $8,314,243 for the six months ended June 30, 2001 to $24,536,142 for the six months ended June 30, 2002.
 
While earnings of $0.22 per share remained stable for the six months ended June 30, 2002, compared to the six months ended June 30, 2001, earnings per share for the second quarter decreased from $0.12 per share for the three months ended June 30, 2001 to $0.11 per share for the three months ended June 30, 2002, primarily due to a substantial increase in the number of shares outstanding which was not completely matched by a corresponding increase in net income from new property investments.

4


 
PART II—OTHER INFORMATION
 
Item 6.    Exhibits and Reports on Form 8-K
 
(a)
 
The Exhibits to this Amendment No. 1 to Quarterly Report are set forth on the Exhibit Index to Second Quarter Amendment No. 1 to Form 10-Q/A attached hereto.
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WELLS REAL ESTATE INVESTMENT
TRUST, INC.
(Registrant)
By:
 
/s/    DOUGLAS P. WILLIAMS        

   
Douglas P. Williams
Executive Vice President, Treasurer and
Principal Financial Officer
 
Dated: January 15, 2003
 

5


CERTIFICATIONS
 
I, Leo F. Wells, III, certify that:
 
1.
 
I have reviewed this Amendment No. 1 to Quarterly Report on Form 10-Q/A and the Quarterly Report on Form 10-Q previously filed (collectively, this “Report”) of the registrant;
 
2.
 
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
 
a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared,
 
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this Report (the “Evaluation Date”); and
 
 
c)
 
presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
 
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Dated:    January 15, 2003
     
By:
 
/S/    LEO F. WELLS, III

               
Leo F. Wells, III
Principal Executive Officer
 
 
 

6


 
CERTIFICATIONS
 
I, Douglas P. Williams, certify that:
 
1.
 
I have reviewed this Amendment No. 1 to Quarterly Report on Form 10-Q/A and the Quarterly Report on Form 10-Q previously filed (collectively, this “Report”) of the registrant;
 
2.
 
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
 
a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared,
 
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this Report (the “Evaluation Date”); and
 
 
c)
 
presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
 
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Dated:    January 15, 2003
     
By:
 
/S/    DOUGLAS P. WILLIAMS

               
Douglas P. Williams
Principal Financial Officer

7


EXHIBIT INDEX
TO
SECOND QUARTER AMENDMENT NO. 1 TO FORM 10-Q/A
OF
WELLS REAL ESTATE INVESTMENT TRUST, INC.
 
Exhibit     No.    

  
Description

  99.1
  
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  99.2
  
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

8