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 June 30, 2002 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, PO Box 255427, Sacramento, California 95865-5427
(Address of registrant's principal executive offices) (Zip Code)
1-800-308-4532
(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 June 30, 2002
par value one dollar per share 26,565
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USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - June 30, 2002 and
December 31, 2001 ................................. 3
Statements of Income - For the Three Months
Ended June 30, 2002 and 2001 ...................... 4
Statements of Income - For the Six Months
Ended June 30, 2002 and 2001 ...................... 5
Statements of Cash Flows - For the Six
Months Ended June 30, 2002 and 2001 ............... 6
Notes to Financial Statements ....................... 7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..... 8
Part II. Other Information ................................... 9
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PART I. FINANCIAL INFORMATION
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
June 30, December 31,
2002 2001
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $4,841,446 at June 30,
2002 and $4,562,374 at December 31, 2001 $ 19,409,290 $ 19,554,997
Note receivable 125,000 150,000
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19,534,290 19,704,997
Cash 24,146 737,709
Other assets 301,273 307,263
----------- -----------
Total assets $ 19,859,709 $ 20,749,969
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 3,696,132 $ 3,755,977
Line of credit 2,535,000 2,824,285
Lease deposits 53,301 53,301
Accounts payable and accrued expenses 13,254 6,923
----------- -----------
Total liabilities 6,297,687 6,640,486
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 62,500 shares;
26,565 shares outstanding at June 30,
2002 and 26,898 at December 31, 2001 $ 26,565 $ 26,898
Additional paid-in capital 30,676,201 30,834,227
Distributions in excess of cumulative
net income (17,140,744) (16,751,642)
----------- -----------
Total shareholders' equity 13,562,022 14,109,483
----------- -----------
Total liabilities and shareholders' equity $ 19,859,709 $ 20,749,969
=========== ===========
See accompanying notes to financial statements.
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USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Three Months Ended
June 30,
2002 2001
---------- ----------
Revenues:
Rent $ 674,233 $ 787,086
Interest 3,125 3,750
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677,358 790,836
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Expenses:
Operating expenses 82,165 82,840
Property taxes 53,007 51,768
Property management fees 13,200 13,200
Interest 108,858 188,750
Depreciation and amortization 131,955 162,000
General and administrative 33,128 41,352
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422,313 539,910
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Net income $ 255,045 $ 250,926
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Net income per share of beneficial interest $ 9.58 $ 9.25
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See accompanying notes to financial statements.
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USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Six Months Ended
June 30,
2002 2001
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Revenues:
Rent $ 1,359,998 $ 1,592,388
Interest 6,667 7,292
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1,366,665 1,599,680
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Expenses:
Operating expenses 167,651 168,107
Property taxes 107,034 105,768
Property management fees 26,400 26,400
Interest 218,211 379,119
Depreciation and amortization 299,072 324,000
General and administrative 92,303 109,935
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$ 910,671 $ 1,113,329
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Net income $ 455,994 $ 486,351
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Net income per share of beneficial interest $ 17.16 $ 17.93
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See accompanying notes to financial statements.
6 Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 455,994 486,351
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Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 299,072 324,000
Changes in other assets and liabilities:
(Increase) decrease in other assets (14,010) 20,101
Increase in accounts payable and
accrued expenses 6,331 10,000
---------- ----------
Total adjustments to income 291,393 354,101
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Net cash provided by
operating activities 747,387 840,452
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and improvements to
rental properties (133,365) (177,079)
Decrease in notes receivable 25,000 75,000
---------- ----------
Net cash used in investing activities (108,365) (102,079)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in line of credit, net (289,285) 204,374
Redemption of shares (158,359) (169,324)
Principal payments on long-term notes payable (59,845) (95,737)
Distributions paid (845,096) (858,708)
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Net cash used in
financing activities (1,352,585) (919,395)
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Net (decrease) increase in cash (713,563) (181,022)
Cash and cash equivalents, beginning of period 737,709 90,600
---------- ----------
Cash and cash equivalents, end of period $ 24,146 $ (90,422)
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See accompanying notes to financial statements.
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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 June 30, 2002, and the results of its operations
for the six months ended June 30, 2002 and 2001 and cash flows for the six
months ended June 30, 2002 and 2001.
The accounting policies followed by the Trust are set forth in Note 1 to
the Trust's financial statements in the 2001 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.
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USA REAL ESTATE INVESTMENT TRUST
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Rent revenues decreased $112,853 and $232,390 for the three months and
six months ended June 30, 2002, respectively, compared to the three and six
months ended June 30, 2001. These decreases were primarily due to the sale
of 845 Harbor Boulevard in West Sacramento, California in December 2001.
Interest expense decreased $79,892 and $160,908 for the three months and six
months ended June 30, 2002, respectively, compared to the three and six months
ended June 30, 2001 due to lower average levels of outstanding debt during
2002.
Net income was $9.58 and $17.16 per share for the three months and six months
ended June 30, 2002, respectively, compared to $9.25 and $17.93 for the three
months and six months ended June 30, 2001, respectively.
The Trust paid distributions of $15.84 and $31.68 per share for the three
months and six months ended June 30, 2002 and June 30, 2001, 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 note 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.
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PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 5: OTHER INFORMATION:
On May 4, 2002, the Annual Meeting of the Shareholders of the Trust was held
in Sacramento, California. The three trustees were re-elected: Gregory E.
Crissman, Benjamin A. Diaz and Joyce A. Marks.
ITEM 6: REPORTS ON FORM 8-K
None.
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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
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August 7, 2002 Gregory Crissman
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Date Gregory Crissman
Chairman
August 7, 2002 Benjamin Diaz
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Date Benjamin Diaz
Trustee