SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended June 30, 2003 | ||
| or | ||
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o
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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 0-49782
T REIT, Inc.
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Virginia
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52-2140299 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| 1551 N. Tustin Avenue, Suite 200 | (877) 888-7348 | |
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Santa Ana, California 92705
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(Registrant’s telephone number, | |
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(Address of principal executive
offices)
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including area code) | |
N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No þ
As of August 12, 2003, there were 4,663,824 shares of common stock of T REIT, Inc. outstanding.
T REIT, INC.
FORM 10-Q
INDEX
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| PART I FINANCIAL INFORMATION | ||||||
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Item 1.
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Financial Statements | 2 | ||||
| Consolidated Balance Sheets as of June 30, 2003 (Unaudited) and December 31, 2002 | 3 | |||||
| Consolidated Statements of Operations for the three-month and six-month periods ended June 30, 2003 and 2002 (Unaudited) | 4 | |||||
| Consolidated Statement of Shareholders’ Equity for the six month period ended June 30, 2003 (Unaudited) | 5 | |||||
| Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2003 and 2002 (Unaudited) | 6 | |||||
| Notes to Consolidated Financial Statements | 7 | |||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 | ||||
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Item 3.
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Quantitative and Qualitative Disclosure About Market Risks | 27 | ||||
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Item 4.
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Controls and Procedures | 28 | ||||
| PART II OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 28 | ||||
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Item 2.
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Changes in Securities and Use of Proceeds | 28 | ||||
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Item 3.
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Defaults Upon Senior Securities | 28 | ||||
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Item 4.
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Submission of Matters to a Vote of Security Holders | 28 | ||||
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Item 5.
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Other Information | 29 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 29 | ||||
| Signatures | 32 | |||||
1
PART I — FINANCIAL INFORMATION
| Item 1. | Financial Statements |
The accompanying June 30, 2003 and 2002 interim financial statements of the Company required to be filed with this Form 10-Q Quarterly Report were prepared by management without audit and commence on the following page, together with the related Notes. In the opinion of management, these interim financial statements present fairly the financial condition, results of operations and cash flows of the Company, but should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2002 included in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission (“SEC”).
2
T REIT, INC.
| June 30, | |||||||||
| 2003 | December 31, | ||||||||
| (Unaudited) | 2002 | ||||||||
| ASSETS | |||||||||
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Real estate investments:
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|||||||||
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Operating properties
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$ | 15,685,292 | $ | 37,374,780 | |||||
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Property held for sale, net
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29,521,935 | 3,917,239 | |||||||
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Investments in unconsolidated real estate
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19,439,554 | 14,499,831 | |||||||
| 64,646,781 | 55,791,850 | ||||||||
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Less: accumulated depreciation
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(231,778 | ) | (1,111,856 | ) | |||||
| 64,415,003 | 54,679,994 | ||||||||
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Cash and cash equivalents
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1,150,696 | 6,129,468 | |||||||
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Accounts receivable, net
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358,344 | 242,587 | |||||||
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Accounts receivable from related parties
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354,209 | 593,670 | |||||||
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Real estate deposits
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— | 3,918,743 | |||||||
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Other assets, net
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2,343,448 | 1,617,263 | |||||||
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Note receivable
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583,323 | 587,178 | |||||||
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Total assets
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$ | 69,205,023 | $ | 67,768,903 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
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Accounts payable and accrued liabilities
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$ | 812,434 | $ | 997,870 | |||||
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Distributions payable
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321,279 | 321,252 | |||||||
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Security deposits and prepaid rent
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99,391 | 144,018 | |||||||
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Notes payable
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9,333,996 | 25,221,036 | |||||||
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Notes payable secured by property held for sale
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20,697,303 | 2,869,089 | |||||||
| 31,264,403 | 29,553,265 | ||||||||
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Commitments and contingencies
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Shareholders’ equity:
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Common stock, $.01 par value; 10,000,000 shares
authorized; 4,720,176 shares issued and 4,694,561 outstanding at
June 30, 2003 and 4,696,300 at December 31, 2002
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47,202 | 47,202 | |||||||
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Additional paid-in capital
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41,265,443 | 41,265,443 | |||||||
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Treasury stock, 25,615 and 23,876 shares at
June 30, 2003 and December 31, 2002, respectively
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(236,393 | ) | (220,653 | ) | |||||
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Distributions in excess of earnings
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(3,135,632 | ) | (2,876,354 | ) | |||||
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Total shareholders’ equity
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37,940,620 | 38,215,638 | |||||||
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Total liabilities and shareholders’ equity
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$ | 69,205,023 | $ | 67,768,903 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
3
T REIT, INC.
| Six Months Ended | Three Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
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Revenues
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Rental income
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$ | 1,128,787 | $ | — | $ | 636,154 | $ | — | |||||||||
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Interest income
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65,231 | 188,447 | 40,544 | 77,397 | |||||||||||||
| 1,194,018 | 188,447 | 676,698 | 77,397 | ||||||||||||||
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Expenses
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Rental expenses
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400,360 | — | 236,227 | — | |||||||||||||
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General and administrative
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372,483 | 381,349 | 252,229 | 265,065 | |||||||||||||
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Depreciation and amortization
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174,757 | — | 106,540 | — | |||||||||||||
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Interest (including amortization of deferred
financing fees)
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215,203 | — | 93,949 | — | |||||||||||||
| 1,162,803 | 381,349 | 688,945 | 265,065 | ||||||||||||||
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Income (loss) before equity in earnings of
unconsolidated real estate
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31,215 | (192,902 | ) | (12,247 | ) | (187,668 | ) | ||||||||||
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Equity in earnings of unconsolidated real estate
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964,057 | 410,283 | 405,896 | 356,150 | |||||||||||||
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Income from continuing operations before gain on
sale of real estate investments
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995,272 | 217,381 | 393,649 | 168,482 | |||||||||||||
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Gain on sale of real estate investments
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23,617 | — | — | — | |||||||||||||
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Income from continuing operations
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1,018,889 | 217,381 | 393,649 | 168,482 | |||||||||||||
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Income from discontinued operations —
property held for sale, net
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650,156 | 544,985 | 488,498 | 263,060 | |||||||||||||
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Net income
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$ | 1,669,054 | $ | 762,366 | $ | 882,147 | $ | 431,542 | |||||||||
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Net income per common share:
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Continuing operations — basic and
diluted
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$ | 0.22 | $ | 0.06 | $ | 0.08 | $ | 0.04 | |||||||||
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Discontinued operations — basic and
diluted
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$ | 0.14 | $ | 0.16 | $ | 0.10 | $ | 0.07 | |||||||||
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Total net income per common share —
basic and diluted
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$ | 0.36 | $ | 0.22 | $ | 0.18 | $ | 0.11 | |||||||||
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Dividends declared per share
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$ | 0.41 | $ | 0.41 | $ | 0.21 | $ | 0.21 | |||||||||
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Weighted average common shares outstanding
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Basic
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4,695,512 | 3,366,673 | 4,694,733 | 3,937,623 | |||||||||||||
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Diluted
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4,700,070 | 3,574,201 | 4,703,799 | 4,158,901 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
T REIT, INC.
| Common | Additional | Distributions | ||||||||||||||||||||||
| Number of | Stock Par | Paid-in | Treasury | in Excess of | ||||||||||||||||||||
| Shares | Value | Capital | Stock | Earnings | Total | |||||||||||||||||||
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BALANCE — December 31, 2002
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4,696,300 | $ | 47,202 | $ | 41,265,443 | $ | (220,653 | ) | $ | (2,876,354 | ) | $ | 38,215,638 | |||||||||||
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Dividends
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— | — | — | — | (1,928,332 | ) | (1,928,332 | ) | ||||||||||||||||
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Repurchase of shares
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(1,739 | ) | — | — | (15,740 | ) | — | (15,740 | ) | |||||||||||||||
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Net income
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— | — | — | — | 1,669,054 | 1,669,054 | ||||||||||||||||||
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BALANCE —
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4,694,561 | $ | 47,202 | $ | 41,265,443 | $ | (236,393 | ) | $ | (3,135,632 | ) | $ | 37,940,620 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
T REIT, INC.
| Six Months | Six Months | ||||||||||
| Ended | Ended | ||||||||||
| June 30, 2003 | June 30, 2002 | ||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$ | 1,669,054 | $ | 762,366 | |||||||
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Adjustments to reconcile net income to net cash
provided by operating activities
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Equity in earnings of unconsolidated real estate,
net of distributions
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(964,057 | ) | (410,283 | ) | |||||||
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Gain on sale of real estate investment
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(23,617 | ) | — | ||||||||
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Depreciation — continuing operations
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174,757 | 18,439 | |||||||||
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Depreciation — discontinued operations
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102,176 | 419,574 | |||||||||
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Amortization of deferred financing fees
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88,982 | 87,708 | |||||||||
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Change in operating assets and liabilities:
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Accounts receivable
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(115,757 | ) | (275,302 | ) | |||||||
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Accounts receivable from related parties
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239,461 | 403,029 | |||||||||
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Other assets
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(815,167 | ) | (386,556 | ) | |||||||
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Accounts payable and accrued liabilities
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(185,436 | ) | 468,056 | ||||||||
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Security deposits and prepaid rent
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(44,627 | ) | (65,606 | ) | |||||||
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Net cash provided by operating activities
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125,769 | 1,021,425 | |||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of real estate operating properties
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(8,891,156 | ) | (75,000 | ) | |||||||
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Purchase of investments in unconsolidated real
estate
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(3,975,666 | ) | (12,010,718 | ) | |||||||
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Real estate property improvements
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— | (39,434 | ) | ||||||||
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Proceeds from disposition of property held for
sale
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3,842,581 | — | |||||||||
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Collections of notes receivable
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3,855 | 3,521 | |||||||||
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Collections of notes receivable from related
parties
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— | 379,131 | |||||||||
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Real estate deposits applied to purchases
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3,918,743 | 631,500 | |||||||||
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Net cash used in investing activities
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(5,101,643 | ) | (11,111,000 | ) | |||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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Issuance of common shares
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— | 19,851,226 | |||||||||
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Borrowings under notes payable
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5,000,000 | 456,237 | |||||||||
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Principal payments on notes payable
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(3,058,826 | ) | (132,132 | ) | |||||||
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Repurchase of shares
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(15,740 | ) | (116,090 | ) | |||||||
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Distributions paid
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(1,928,332 | ) | (1,410,257 | ) | |||||||
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Net cash (used in) provided by financing
activities
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(2,898 | ) | 18,648,984 | ||||||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS
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(4,978,772 | ) | 8,559,409 | ||||||||
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CASH AND CASH EQUIVALENTS — beginning
of period
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6,129,468 | 3,647,159 | |||||||||
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CASH AND CASH EQUIVALENTS — end of
period
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1,150,696 | 12,206,568 | |||||||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid during the period for:
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Interest
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$ | 967,019 | $ | 980,753 | |||||||
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Income taxes
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$ | 17,488 | |||||||||