Amendment #2 to Form 10-Q
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-Q/A
 
Amendment No. 2
 
(Mark One)
 
x    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 
For the quarterly period ended March 31, 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. 2 to the Form 10-Q of Wells Real Estate Investment Trust, Inc. (the “Company”) for the period ended March 31, 2002 amends the Form 10-Q previously filed, as amended by Amendment No. 1 to the Form 10-Q dated July 10, 2002, by amending the Consolidated Statements of Income for the three months ended March 31, 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 the prior period 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 months ended March 31, 2002:
 
WELLS REAL ESTATE INVESTMENT TRUST, INC.
 
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF INCOME
 
(unaudited)
 
    
Three Months Ended
    
March 31,
2002
   
March 31,
2001
REVENUES:
              
Rental income
   
$
16,738,163
   
$
9,860,085
Operating cost reimbursements*
   
 
4,414,919
   
 
1,562,308
Equity in income of joint ventures
   
 
1,206,823
   
 
709,713
Interest income
   
 
1,113,715
   
 
99,915
Take out fee
   
 
134,102
   
 
0
    
  
    
 
23,607,722
   
 
12,232,021
    
  
EXPENSES:
              
Depreciation
   
 
5,744,452
   
 
3,187,179
Management and leasing fees
   
 
899,495
   
 
565,714
Operating costs*
   
 
5,039,617
   
 
2,653,493
General and administrative
   
 
529,031
   
 
175,107
Interest expense
   
 
440,001
   
 
2,160,426
Amortization of deferred financing costs
   
 
175,462
   
 
214,757
    
  
    
 
12,828,058
   
 
8,956,676
    
  
NET INCOME
   
$
10,779,664
   
$
3,275,345
    
  
EARNINGS PER SHARE
              
Basic and diluted
   
$
0.11
   
$
0.10
    
  
 
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 Statement of Income for the three months ended March 31, 2002 has been amended and restated to reflect the effects of this revised presentation. In addition, the comparative financial information for the prior period has been reclassified to conform to the presentation in the 2002 financial statement.
 
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 March 31, 2002 and 2001, respectively. There were no additional investments in joint ventures made by the Company during the three months ended March 31, 2002.
 
    
Total Revenues
   
Net Income
   
Wells OP’s Share of Net Income
    
Three Months Ended
   
Three Months Ended
   
Three Months Ended
    
March 31,
2002
   
March 31,
2001
   
March 31,
2002
   
March 31,
2001
   
March 31,
2002
   
March 31,
2001
Fund IX-X-XI-REIT Joint Venture
   
$
1,384,155
   
$
1,470,111
   
$
554,268
   
$
638,435
   
$
20,572
   
$
23,696
Cort Joint Venture
   
 
212,387
   
 
199,586
   
 
129,750
   
 
133,753
   
 
56,658
   
 
58,406
Fremont Joint Venture
   
 
225,443
   
 
227,193
   
 
135,948
   
 
142,612
   
 
105,365
   
 
110,530
Fund XI-XII-REIT Joint Venture
   
 
861,033
   
 
855,779
   
 
497,149
   
 
514,277
   
 
282,197
   
 
291,918
Fund XII-REIT Joint Venture
   
 
1,673,839
   
 
953,510
   
 
805,513
   
 
445,321
   
 
442,726
   
 
208,634
Fund VIII-IX-REIT Joint Venture
   
 
324,680
   
 
267,624
   
 
160,696
   
 
105,033
   
 
273,931
   
 
16,529
Fund XIII REIT Joint Venture
   
 
700,857
   
 
0
   
 
401,674
   
 
0
   
 
25,374
   
 
0
    
  
  
  
  
  
    
 
$5,382,394
   
 
$3,973,803
   
 
$2,684,998
   
 
$1,979,431
   
 
$1,206,823
   
 
$709,713
    
  
  
  
  
  
 
Total revenues for the three months ended March 31, 2002 presented above have been amended and restated to include operating cost reimbursements as revenue, consistent with the presentation described in Note 1(k).

3

 
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 March 31, 2002, the Company’s real estate properties were 100% leased to tenants. Gross revenues were $23,607,722 and $12,232,021 for the three months ended March 31, 2002 and 2001, respectively. Gross revenues for the three months ended March 31, 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 additional properties for $104,051,998 during 2002 and the purchase of additional properties for $227,933,858 in the last three quarters of 2001. The purchase of additional properties also resulted in an increase in expenses which totaled $12,828,058 for the three months ended March 31, 2002, as compared to $8,956,676 for the three months ended March 31, 2001. Expenses in 2002 and 2001 consisted primarily of depreciation, interest expense, management and leasing fees and general and administrative costs. As a result, the Company’s net income also increased from $3,275,345 for the three months ended March 31, 2001 to $10,779,664 for the three months ended March 31, 2002.

4

 
PART II—OTHER INFORMATION
 
Item 6.    Exhibits and Reports on Form 8-K
 
(a)
 
The Exhibits to this Amendment No. 2 to Quarterly Report are set forth on the Exhibit Index to First Quarter Amendment No. 2 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. 2 to Quarterly Report on Form 10-Q/A and 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. 2 to Quarterly Report on Form 10-Q/A and 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
FIRST QUARTER AMENDMENT NO. 2 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