1 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended September 30, 2001 Commission file number 0-16508
USA REAL ESTATE INVESTMENT TRUST
(Exact Name of Registrant as specified in its Charter)
California 68-0109347
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
PMB 314, P.O. Box 255427, Sacramento, California 95825-5427
(Address of registrant's principal executive offices) (Zip Code)
(800)308-4532
(Registrant's telephone number, including area code)
COMMONWEALTH EQUITY TRUST USA
(Former name)
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.
/ X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practical date.
Certificates of Beneficial Interest Outstanding at September 30, 2001
par value one dollar per share 26,972
2
USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - September 30, 2001 and
December 31, 2000 ................................. 3
Statements of Income - For the Nine Months
Ended September 30, 2001 and 2000 ................. 4
Statements of Income - For the Nine Months
Ended September 30, 2001 and 2000 ................. 5
Statements of Cash Flows - For the Nine
Months Ended September 30, 2001 and 2000 .......... 6
Notes to Financial Statements ....................... 7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..... 8
Part II. Other Information ................................... 8
3
PART I. FINANCIAL INFORMATION
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
September 30, December 31,
2001 2000
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $4,550,879 at September 30,
2001 and $4,109,853 at December 31, 2000 $ 23,121,590 $ 23,774,370
Notes receivable 150,000 225,000
---------- -----------
23,271,590 23,999,370
Cash and cash equivalents 23,354 90,600
Other assets 362,171 386,127
----------- -----------
Total assets $ 23,657,115 $ 24,476,097
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 6,208,987 $ 6,354,029
Line of credit 2,960,400 3,030,000
Accounts payable and accrued expenses 65,462 0
Lease deposits 58,502 58,502
----------- -----------
Total liabilities 9,293,351 9,442,531
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 62,500 shares;
26,972 shares outstanding at September 30,
2001 and 27,459 at December 31, 2000 $ 26,972 $ 27,459
Additional paid-in capital 30,870,485 31,110,030
Distributions in excess of cumulative
net income (16,533,693) (16,103,923)
----------- -----------
Total shareholders' equity 14,363,764 15,033,566
----------- -----------
Total liabilities and shareholders' equity $ 23,657,115 $ 24,476,097
=========== ===========
See accompanying notes to financial statements.
4
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Three Months Ended
September 30,
2001 2000
---------- ----------
Revenues:
Rent $ 776,355 $ 800,250
Interest 3,750 10,805
---------- ----------
780,105 811,055
---------- ----------
Expenses:
Operating expenses 73,120 79,081
Property taxes 54,000 54,000
Property management fees 13,200 13,200
Interest 172,470 178,148
Depreciation and amortization 162,000 162,000
General and administrative 48,242 49,071
---------- ----------
523,032 535,500
---------- ----------
Net income before gain on sale of properties 257,073 275,555
Loss on sale of properties 119,231 45,955
---------- ----------
Net income $ 376,304 $ 321,510
========== ==========
Net income per share of beneficial interest $ 13.91 $ 11.16
========== ==========
See accompanying notes to financial statements.
5
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Nine Months Ended
September 30,
2001 2000
---------- ----------
Revenues:
Rent $ 2,368,743 $ 2,447,196
Interest 11,042 50,461
---------- ----------
2,379,785 2,497,657
---------- ----------
Expenses:
Operating expenses 241,227 228,444
Property taxes 159,768 162,000
Property management fees 39,600 39,600
Interest 551,589 554,284
Depreciation and amortization 486,000 486,000
General and administrative 158,177 187,457
---------- ----------
1,636,361 1,657,785
---------- ----------
Net income before gain on sale of properties 743,424 839,872
Gain on sale of properties 119,231 45,955
---------- ----------
Net income $ 862,655 $ 885,827
========== ==========
Net income per share of beneficial interest $ 31.70 $ 30.16
========== ==========
See accompanying notes to financial statements.
6 Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 862,655 885,827
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 486,000 486,000
Gain on sale of properties (119,231) (45,955)
Changes in other assets and liabilities:
Decrease in other assets 23,956 11,979
Increase in accounts payable
and accrued expenses 65,462 0
Decrease in lease deposits 0 (3,781)
---------- ----------
Total adjustments to income 456,187 448,243
---------- ----------
Net cash provided by
operating activities 1,318,842 1,334,070
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and improvements to
rental properties (404,536) (138,930)
Decrease in notes receivable 75,000 (801,000)
Proceeds from the sale of properties 690,547 495,955
---------- ----------
Net cash provided by
investing activities 361,011 1,158,025
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in line of credit, net (69,600) (271,000)
Redemption of shares (240,032) (738,499)
Principal payments on long-term notes payable (145,042) (134,039)
Distributions paid (1,292,425) (1,392,115)
---------- ----------
Net cash used by
financing activities (1,747,099 (2,535,653)
---------- ----------
Net decrease in cash (67,246) (43,558)
Cash and cash equivalents, beginning of period 90,600 71,679
---------- ----------
Cash and cash equivalents, end of period $ 23,354 $ 28,121
========== ==========
See accompanying notes to financial statements.
7
USA REAL ESTATE INVESTMENT TRUST
Notes to Financial Statements
1. In the opinion of the Trust, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Trust's
financial position as of September 30, 2001, and the results of its
operations for the nine months ended September 30, 2001 and 2000 and cash
flows for the nine months ended September 30, 2001 and 2000.
The accounting policies followed by the Trust are set forth in Note 1 to
the Trust's financial statements in the 2000 Form 10-K, which are
incorporated herein by reference.
2. In 1987, the Trust elected to be taxed as a real estate investment trust
and, as such, will not be taxed on that portion of its taxable income
which is distributed to shareholders provided that at least 95% of its
real estate investment trust taxable income is distributed.
The Trust intends to continue to qualify as a real estate investment trust
and, accordingly, no provision for income taxes has been made in the
financial statements.
3. Effective October 1, 2000, the Trust executed a one for four reverse share
split and a concurrent elimination of all fractional shares less than one
when the shareholder account held less than one share. All references to
the number of shares and per share amounts have been restated to reflect
the impact of the reverse share split.
8
USA REAL ESTATE INVESTMENT TRUST
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The $45,955 or $1.60 per share gain on sale of rental properties was
attributed to the sale of 3090 Sunrise Boulevard in Rancho Cordova,
California in July, 2000.
The $119,231 or $4.38 per share gain on sale of rental properties was
attributed to the sale of 7390 Greenback Lane in Citrus Heights, California
in July, 2001.
Net income was $13.91 and $31.70 per share for the three months and nine
months ended September 30, 2001, respectively, compared to $11.16 and $30.16
for the three months and nine months ended September 30, 2000, respectively.
The Trust paid distributions of $15.84 and $47.52 per share for the three
months and nine months ended September 30, 2001, and September 30, 2000,
respectively.
CAPITAL RESOURCES AND LIQUIDITY
The Trust meets its liquidity requirements through net cash provided by
operating activities, along with traditional debt alternatives available to
it and proceeds from the sale of properties. Cash provided by operating
activities is distributed to shareholders in the form of dividends.
Accordingly, capital outlays for renovations, principal payments on long-
term notes payable and share repurchases require additional sources of
capital. The expected additional sources of capital are debt and proceeds
from the sale of properties.
The Trust's capital requirements depend upon the level of improvements and
redevelopment of its existing properties. The sources of funding will be
draws on its lines of credit, collection of the remaining balance of notes
receivable or additional debt. In addition, the Trust has identified
certain of its properties that may be sold as a source of funding, if the
Trust's sale prices are met.
9
PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 5: OTHER INFORMATION:
None.
ITEM 6: REPORTS ON FORM 8-K
None.
10
USA REAL ESTATE INVESTMENT TRUST
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA Real Estate Investment Trust
----------------------------------------
November 9, 2001 Gregory Crissman
-------------------- ----------------------------------------
Date Gregory Crissman
Chairman
November 9, 2001 Benjamin Diaz
-------------------- ----------------------------------------
Date Benjamin Diaz
Trustee