SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997*
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 333-35105
LOCKHART CARIBBEAN CORPORATION
(Exact Name of Registrant as Specified in Its charter)
U.S. VIRGIN ISLANDS 65-0491618
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
NO. 44 ESTATE THOMAS
ST. THOMAS, U.S. VIRGIN ISLANDS 00802
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(340) 776-1900
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
None None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of Class)
* This report contains only Management's Discussion and Analysis of Financial
Conditions and Results of Operations and the consolidated financial statements
of the Registrant in accordance with Rule 15d-2 under the Securities Exchange
Act of 1934.
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___ No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
There is currently no public market for the registrant's voting stock.
Shares of Common Stock outstanding at March 31, 1998 were 8,672,617 shares,
consisting of 8,750 shares of Class A Common Stock and 8,663,867 shares of Class
B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited
consolidated financial statements of Lockhart Caribbean Corporation and
subsidiaries and the notes thereto appearing elsewhere in this report. This
report contains "forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. These statements are based
on management's beliefs and assumptions, based on information currently
available to management and are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations as well as statements preceded by, followed
by, or that include, the words "believes," "expects," "anticipates," "intends,"
"plans," "estimates" or similar expressions. Forward-looking statements are not
guarantees of performance, and future results may differ materially from those
expressed in these forward-looking statements. Readers are cautioned not to put
undue reliance on any forward-looking statements.
Overview
Lockhart Caribbean Corporation (the "Company") owns, acquires,
operates, develops, and manages shopping centers, commercial parks, and other
commercial real estate, primarily on the islands of St. Thomas and St. Croix.
The Company's revenue is currently derived from the rental of retail and office
space and long-term ground leases of real property. In 1997 and 1996, building
space rental generated 89% of total revenue and ground lease payments accounted
for 11%. Revenue growth from 1995 to 1997 (an increase of $1.1 million) is
primarily attributable to the acquisition of Fort Mylner Commercial Center, Fort
Mylner Shopping Center and Orange Grove Shopping Center (collectively, the
"Acquisition Properties") in June 1996.
The Company's two wholly-owned subsidiaries, H.E. Lockhart Management,
Inc. ("HELM") and Lockhart Realty, Inc. ("LRI") account for 100% of the
Company's revenue. HELM owns and manages seven shopping centers, serving both
the tourist and local sectors, with a mix of office and retail space. HELM also
owns two parcels which it leases to tenants under long-term ground leases. LRI
retains ownership of undeveloped real estate and operates the commercial parks.
In 1997, HELM accounted for 90% of the Company's total revenue, and LRI
accounted for 10%.
LRI is expected to account for a greater portion of total revenue in
the future as it develops the real property holdings of approximately 415 acres
zoned for residential use. HELM is expected to generate increased revenues
commencing in 1998 from new lease agreements negotiated with tenants at one of
the Company's tourist-oriented shopping centers. In addition, the Company's
planned renovation of Lockhart Gardens Shopping Center and of the Grand Hotel
Court, each scheduled to start in 1999, will add an aggregate of approximately
30,000 square feet of retail space.
<PAGE>
The Company is currently pursuing a strategy to enhance revenue growth
and achieve geographic and line-of-business diversification. The strategy
involves an entry into the consumer financial services industry and expanding
into other Caribbean markets. The Company has agreed to acquire Premium Finance
Company of the V.I., Inc. ("PFC"), an insurance premium financing company that
has an established and growing business in the U.S. Virgin Islands and the
British Virgin Islands. PFC has also made inroads into certain other Eastern
Caribbean markets, such as Anguilla, Antigua, Grenada, St. Vincent and St.
Maarten.
Results of Operations
Year Ended December 31, 1997 Compared With Year Ended December 31, 1996
Total revenue (rental income, tenant expense reimbursements, and other
operating income) for 1997 increased by $890,047 or 21% over 1996. Of this
increase, $757,550 was due to a full year of revenue from the Acquisition
Properties.
For the years ended December 31, 1997 and 1996, total operating
expenses were $4,680,172 and $3,884,743, respectively.
Exclusive of depreciation and amortization, other operating expenses of
$3,232,688 accounted for 63% of total revenue for the year ended December 31,
1997. The $792,719 increase in such expenses from 1996 was due to (i) a full
year of operating expenses in 1997 compared to only six months of operating
expenses in 1996 at the Acquisition Properties, and (ii) increases in the
reserve for doubtful accounts, contracted security guard services at the
properties, and pension and retirement benefits.
Depreciation and amortization increased by $202,710 or 16% for the year
ended December 31, 1997. The increase was due primarily to the Acquisition
Properties and the $6.0 million investment in the reconstruction of Lockhart
Gardens Shopping Center as a consequence of damage caused by Hurricane Marilyn
in September, 1995.
Interest expense increased by $573,013 or 34% for the year due to (i)
an $11.0 million increase in bank debt to purchase the Acquisition Properties
and pay for additional costs incurred in the reconstruction of Lockhart Gardens
Shopping Center, (ii) increased borrowings under the Company's line of credit,
and (iii) a 50 basis point increase in the prime rate in April, 1997, which
resulted in a corresponding increase in the interest rate payable under the
Company's bank debt and line of credit.
For the year ended December 31, 1997, the Company made a one-time
payment to Woolworth Corp. of $200,000 to terminate their lease at Lockhart
Gardens Shopping Center. The Company collected $200,000 from Kmart as
reimbursement of the lease termination payment to Woolworth Corp., and such
amount will be amortized over the initial term of Kmart's lease in accordance
with FASB 13.
As a result of the foregoing, the Company showed a net loss (including
depreciation and amortization) of $1,369,465 for 1997 compared to a net loss of
$832,710 for 1996.
<PAGE>
Year Ended December 31, 1996 Compared With Year Ended December 31, 1995
Total revenue for the years ended December 31, 1996 and 1995 was
$4,216,733 and $3,971,800, respectively. The $244,933, or 6%, increase resulted
principally from six months of revenue from the Acquisition Properties. Gross
revenue from the Acquisition Properties of $721,902 was partially offset by a
decrease of $476,969 in revenue generation from other properties as a result of
damage caused by Hurricane Marilyn. With the receipt of $453,355 in insurance
reimbursements for business interruption losses, revenue loss at the affected
properties was principally due to vacancies resulting from tenants who were
unable to resume business even after reconstruction was completed at the
affected properties, as well as the continued vacancy at the damaged northern
end of Lockhart Gardens Shopping Center. The Company expects to commence
reconstruction at the northern end of Lockhart Gardens Shopping Center once a
dispute with the ground lessee over reconstruction of their supermarket facility
is resolved.
For the years ended December 31, 1996 and 1995, total operating
expenses were $3,884,743 and $3,663,547 respectively.
Exclusive of depreciation and amortization, other operating expenses
decreased by $117,315 or 4.3% despite the addition of the Acquisition
Properties. Lower expenses resulted from a reduction in overhead costs and the
elimination of certain professional fees incurred in 1995 to facilitate
settlement of insurance claims resulting from Hurricane Marilyn. Adjusting for
expenses of the Acquisition Properties, operating expenses exclusive of
depreciation and amortization, decreased by $342,411 or 12% in 1996.
Depreciation and amortization increased by $338,511 or 37% for the year
ended December 31, 1996 compared to the year ended December 31, 1995. The
increase was due primarily to the Acquisition Properties and the full
amortization of certain capitalized loan costs related to banks notes that were
liquidated in October, 1996.
Interest expense increased by $591,726 or 55% for the year ended
December 31, 1996 compared to the year ended December 31, 1995. The increase in
interest expense was due to an $11.0 million increase in bank debt to purchase
the Acquisition Properties and pay for additional costs incurred in the
reconstruction of the southern section of Lockhart Gardens Shopping Center.
Insurance proceeds of $75,670 and $5,916,981 for the years ended
December 31, 1996 and 1995, respectively, represent amounts collected or
receivable from insurance companies for repairs to properties damaged by
Hurricane Marilyn.
For the year ended December 31, 1996, there was a gain on the sale of
residentially zoned real property as a result of the disposition of
approximately 1.7 acres. For the year ended December 31, 1995, there was a loss
of $850,972 due to a write-off of the net book value of certain properties
damaged by Hurricane Marilyn.
<PAGE>
As a result of the foregoing, the Company had a net loss of $832,710
for the year ended December 31, 1996 compared to net income of $2,503,875 for
the year ended December 31, 1995.
Cash Flow
Net cash flow from operating activities declined by $4.9 million in the
year ended December 31, 1997 compared to the year ended December 31, 1996 as
insurance proceeds of $5.3 million were collected and spent in 1996. Net cash
flow used in investing activities was $14.8 million more in 1996 as a result of
the Acquisition Properties and the reconstruction of the southern section of
Lockhart Gardens Shopping Center through a combination of bank debt and
insurance proceeds. Net cash flow provided by financing activities was $10.8
million more in the year ended December 31, 1996 compared to the year ended
December 31, 1997 as a result of the additional bank financing obtained to
purchase the Acquisition Properties and to fund the additional costs in the
reconstruction of the southern section of Lockhart Gardens Shopping Center.
Net cash flow from operating activities increased by $3.1 million for
the year ended December 31, 1996 compared to 1995 as a result of insurance
proceeds collected in 1996 for the reconstruction of operating properties
damaged by Hurricane Marilyn. Net cash flow used in investing activities
increased by $8.2 million for the year ended December 31, 1996 compared to 1995
due principally to the purchase of the Acquisition Properties compared to the
acquisition of only one operating property, Red Hook Plaza, in 1995. Net cash
flow provided by financing activities increased by $5.9 million as a result of
increased bank debt to fund the purchase of the Acquisition Properties in 1996
compared to the financing of only one operating property acquisition in 1995.
Liquidity and Capital Resources
The principal sources of funding for development, acquisitions,
expansion, and renovations of the Company's properties have historically been
construction loans, and intermediate and permanent debt financing. Proceeds from
insurance companies have been utilized in the past two years to reconstruct
operating properties impacted by Hurricane Marilyn. The majority of the
borrowings are executed at the subsidiary level (HELM and LRI) with a parent
company guarantee.
On October 21, 1996, HELM, entered into a loan agreement (the
"Development Loan") with Banco Popular de Puerto Rico ("BPPR") to (i)
consolidate certain pre-existing development loans, (ii) refinance certain
acquisition indebtedness, (iii) reduce the Company's interest costs, and (iv)
achieve level debt service payments. The parent company, Lockhart Caribbean
Corporation, and HELM's wholly owned subsidiaries (Fort Mylner Properties, Inc.,
Red Hook Plaza, Inc., and Golden Orange Centers, Inc.) have each fully and
unconditionally guaranteed the
<PAGE>
Development Loan. Approximately $19.1 million of proceeds from the Development
Loan was used to retire the mortgages on certain operating properties, and such
amount is secured by first-priority mortgages on Drake's Passage Shopping Mall,
the Grand Hotel Court, Lockhart Gardens Shopping Center and the Acquisition
Properties, and a second-priority mortgage on Red Hook Plaza. HELM is obligated
to make monthly principal and interest payments of approximately $163,500 with
respect to the $19.1 million outstanding balance and expects to fund such
payments with cash flow from operations. The interest on the Development Loan is
at 0.5% above the prime lending rate or 9.0% as of December 31, 1997.
The Development Loan provides for a $1.0 million line of credit with an
interest rate of 0.5% above the prime rate. As of December 31, 1997, the Company
had $254,000 available under the line of credit, and the interest rate was 9.0%.
In addition, the Development Loan will provide approximately $580,000 to fund
the build-out of Lockhart Mall at Lockhart Gardens Shopping Center. The entire
outstanding balance under the Development Loan is due and payable on April 1,
2000. BPPR has agreed, subject to certain conditions including the absence of
any material default by HELM and the Company under the Development Loan, to
convert such balance into a fifteen year loan with covenants similar to those of
the Development Loan.
In 1991, BPPR loaned LRI $1,135,000 to finance site and infrastructure
development of a commercial park at Sugar Estate ("Sugar Estate Park"). The loan
was secured by seven of the eleven acres of land comprising Sugar Estate Park.
In 1997, BPPR approved a loan package to refinance the 1991 LRI loan and provide
additional funds for two development projects for an aggregate borrowing of $3.8
million. Subsequently, LRI modified the request to $1.8 million, which BPPR will
fund for the construction of roads, parking lot and other infrastructure at
Market Square East, the Company's second commercial park development. The loan
will be secured by a first-priority mortgage on land.
In February 1995, HELM acquired Red Hook Plaza for an aggregate
purchase price of $5.8 million from an unaffiliated party. HELM financed this
purchase with a $4.7 million first priority mortgage payable to the seller (the
"Red Hook Loan") and $1.1 million of bank financing. The Red Hook Loan bears
interest at 8.75 % per annum and matures in January 2004. The $1.1 million was
refinanced in October 1996 with proceeds from the Development Loan.
In June 1996, HELM acquired Fort Mylner Commercial Center, Fort Mylner
Shopping Center and Orange Grove Shopping Center for an aggregate purchase price
of $10.1 million from an unaffiliated party. HELM financed the acquisition with
a short-term demand note which was refinanced in October 1996 with proceeds from
the Development Loan.
In August 1997, the Company loaned $75,000 to PFC and guaranteed a
$200,000 bank line of credit extended to PFC for expansion of its operations in
certain Eastern Caribbean islands.
<PAGE>
The Company expects to meet its short-term liquidity requirements with
cash flow from operations. The Company expects cash flow to increase as a result
of (i) a reduction of net operating funds needed to service annual debt, (ii)
the acquisition of PFC, and (iii) increased net rentable space from the
reconstruction and renovation of Lockhart Gardens Shopping Center and Grand
Hotel Court. The Company also believes that the foregoing sources of liquidity
will be sufficient to fund its liquidity needs for the foreseeable future,
including capital maintenance expenditures.
The Company expects to meet certain long-term liquidity requirements,
such as acquisitions, scheduled debt maturities, renovations, expansions,
commercial and residential development ventures, and other non-recurring major
capital improvements, through long-term secured or unsecured debt and the
issuance of equity securities.
The Company is assessing the modification or replacement of its
software that may be necessary for its computer systems to function properly
with respect to dates in the year 2000 and thereafter. The Company does not
believe that the cost of either modifying existing software or converting to new
software will be significant or that the year 2000 issue will pose significant
operational problems for its computer systems.
Recent Developments
The Company is currently conducting an offering of Units, consisting of
one share of Class A Common Stock and one warrant to purchase one-tenth of a
share of Class A Common Stock, on a "best efforts" basis. The offering is being
made pursuant to a registration statement declared effective by the Securities
and Exchange Commission on February 4, 1998. The Company has not yet received
subscriptions for the minimum number of Units offered and, therefore, has not
sold any Units. This is not an offer to sell nor a solicitation to buy; such
offers and solicitations can only be made by means of a prospectus. Copies of
the Company's prospectus can be obtained on the World Wide Web at
http://www.lockhart.com.
In August 1997, The National Capital Bank of Washington extended a line
of credit to the Company for up to $400,000 to be used to fund expenses
associated with the Company's initial public offering. Amounts outstanding under
the line of credit will be repaid from proceeds of the offering. The line of
credit is personally guaranteed by two of the Company's major shareholders. On
March 1, 1998 the National Capital Bank of Washington increased the credit line
by $150,000 to $550,000 in order to fund additional expenses related to the
offering. The line of credit matures in September 1998.
On March 31, 1998, LRI sold approximately 3.6 acres of land at Sugar
Estate Park to the ground lessee for $2.8 million, an amount that is 20% over
the last certified appraisal and 500% above book value. A portion of the
proceeds from the sale were used to repay the 1991 LRI loan, which had a balance
of $737,723 on December 31, 1997.
<PAGE>
The Company has withdrawn its offer to purchase a shopping center
located on Raphune Hill on St. Thomas, as the seller was unable to present clear
title to the property by the agreed upon closing date.
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Audited Consolidated Financial Statements
Years ended December 31, 1997, 1996 and 1995
Index
Report of Independent Auditors.............................................F-1
Consolidated Balance Sheets................................................F-2
Consolidated Statements of Operations......................................F-4
Consolidated Statements of Shareholders' Equity............................F-5
Consolidated Statements of Cash Flows......................................F-6
Notes to Consolidated Financial Statements.................................F-7
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Lockhart Caribbean Corporation
We have audited the accompanying consolidated balance sheets of Lockhart
Caribbean Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Lockhart Caribbean
Corporation and Subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
San Juan, Puerto Rico
February 13, 1998, except for
the first and second paragraphs of Note 12,
as to which the dates are March 1
and March 31, 1998, respectively.
F-1
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Consolidated Balance Sheets
December 31
1997 1996
------------------ ---------------
Assets
Operating property:
Land and improvements $10,146,068 $10,009,236
Buildings and improvements 25,155,646 25,068,409
Equipment 468,369 426,660
Prepaid lease 1,460,657 1,460,657
Construction-in-progress 798,166 265,706
------------------ ---------------
Total operating property 38,028,906 37,230,668
Accumulated depreciation and amortization (5,146,943) (4,002,257)
------------------ ---------------
32,881,963 33,228,411
Cash and cash equivalents 376,930 930,163
Accounts and note receivable, net 771,992 753,773
Prepaid expenses 353,975 325,879
Deferred financing costs, net 354,507 508,189
Other assets 964,213 523,446
------------------ ---------------
Total assets $35,703,580 $36,269,861
================== ===============
F-2
<PAGE>
December 31
1997 1996
------------- ----------------
Liabilities and shareholders' equity
Liabilities:
Notes payable:
Mortgage notes $25,552,581 $24,885,459
Other 401,225 58,033
------------- ----------------
Total notes payable 25,953,806 24,943,492
Property taxes 844,460 778,137
Tenant security deposits 388,902 314,035
Accounts payable 473,771 127,431
Accrued expenses and other liabilities 453,727 350,746
Deferred revenue 200,000 -
Deferred income taxes 648,892 1,422,050
------------- ----------------
Total liabilities 28,963,558 27,935,891
Shareholders' equity:
Preferred stock, par value $.01:
Authorized shares -- 1,000,000, none issued
Class A common stock, par value $.01:
Authorized shares--40,000,000
Issued and outstanding shares--6,560 in 1997 656 -
Class B common stock, par value $.01
Authorized shares--9,000,000
Issued and outstanding shares--8,663,867
in 1997 and 8,622,155 in 1996 86,639 86,222
Additional paid-in capital 6,776,404 6,669,379
Retained earnings (deficit) (123,677) 1,578,369
------------- ----------------
Total shareholders' equity 6,740,022 8,333,970
------------- ----------------
Total liabilities and shareholders' equity $35,703,580 $36,269,861
============= ================
See accompanying notes.
F-3
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
--------------- --------------- ----------------
Income:
<S> <C> <C> <C>
Rental income $ 4,465,945 $ 3,385,002 $ 3,028,074
Tenant expense reimbursements 476,769 248,898 332,159
Other operating income 164,066 582,833 611,567
--------------- --------------- -----------------
Total income 5,106,780 4,216,733 3,971,800
Operating expenses:
Operating and maintenance 299,098 243,817 189,112
Salaries and employee benefits 1,216,426 1,021,097 1,224,344
Utilities 290,062 162,418 94,293
Insurance 538,194 454,670 338,879
Other taxes 577,425 475,836 499,863
Professional fees 206,969 203,157 355,427
Other general and administrative 104,514 78,974 55,366
Depreciation and amortization 1,447,484 1,244,774 906,263
--------------- --------------- -----------------
Total operating expenses 4,680,172 3,884,743 3,663,547
--------------- --------------- -----------------
Operating income 426,608 331,990 308,253
Other income (expense):
Interest expense (2,248,943) (1,675,930) (1,084,204)
Lease termination costs (200,000) - -
Other expenses (124,087) (105,415) (199,863)
Gain (loss) on disposal of
operating property - 86,440 (850,972)
Other income 2,505 1,640 1,535
Insurance proceeds - 75,670 5,916,981
--------------- --------------- -----------------
Total other income (expense) (2,570,525) (1,617,595) 3,783,477
--------------- --------------- -----------------
(Loss) income before income taxes (2,143,917) (1,285,605) 4,091,730
(Benefit) provision for income taxes:
Current - 1,295 (218,558)
Deferred (774,452) (454,190) 1,806,413
--------------- --------------- -----------------
(774,452) (452,895) 1,587,855
--------------- --------------- -----------------
Net (loss) income $(1,369,465) $ (832,710) $ 2,503,875
=============== =============== =================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Class A Class B Additional Retained
Number of Common Common Paid-In Earnings
Shares Stock Stock Capital (Deficit) Total
-------------- -------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 8,334,647 $ - $83,346 $6,217,719 $ 562,304 $ 6,863,369
Issuance of common stock 190,896 - 1,909 284,190 286,099
Net income 2,503,875 2,503,875
Cash dividends (324,487) (324,487)
-------------- -------------- -------------- -------------- --------------- ---------------
Balance at December 31, 1995 8,523,543 - 85,255 6,501,909 2,741,692 9,328,856
Issuance of common stock 96,612 - 967 167,470 168,437
Net loss (832,710) (832,710)
Cash dividends - (330,613) (330,613)
-------------- -------------- -------------- -------------- --------------- ---------------
Balance at December 31, 1996 8,622,155 - 86,222 6,669,379 1,578,369 8,333,970
Issuance of common stock 48,272 656 417 107,025 108,098
Net loss (1,369,465) (1,369,465)
Cash dividends (332,581) (332,581)
-------------- -------------- -------------- -------------- --------------- ---------------
Balance at December 31, 1997 8,670,427 $656 $86,639 $6,776,404 $ (123,677) $ 6,740,022
============== ============== ============== ============== =============== ===============
</TABLE>
See accompanying notes.
F-5
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---------------- ------------------- ------------------
Operating activities
<S> <C> <C> <C>
Net (loss) income $(1,369,465) $ (832,710) $ 2,503,875
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 1,447,484 1,244,774 906,263
Deferred income taxes (774,452) (454,190) 1,806,413
(Gain) loss on disposal of operating property - (86,440) 850,972
Changes in operating assets and liabilities:
Accounts and notes receivable (18,219) 5,331,427 (5,296,594)
Prepaid expenses (28,096) (75,781) (31,582)
Other assets (642,456) (1,179,207) (47,354)
Tenant security deposits 74,867 88,398 67,016
Accounts payable and accrued expenses 516,938 242,007 443,956
Deferred revenue 200,000 - -
---------------- ------------------- ------------------
Net cash (used in) provided by operating activities (593,399) 4,278,278 1,202,965
Investing activities
Acquisition of land and land improvements (136,832) (2,986,417) (1,013,862)
Sale of land - 80,405 -
Acquisition of buildings and improvements (87,237) (12,547,702) (6,275,945)
Acquisition of other operating property (521,597) (73,728) (22,110)
Acquisition of equipment - (58,692) (48,483)
---------------- ------------------- ------------------
Net cash used in investing activities (745,666) (15,586,134) (7,360,400)
Financing activities
Principal payments on mortgage and other notes payable (278,878) (17,555,996) (290,840)
Proceeds from issuance of mortgage and other notes payable 1,289,723 29,800,000 6,334,260
Proceeds from issuance of common stock 126,134 256,513 286,099
Repurchase of common stock (18,036) (88,076) -
Principal payments on installment note payable (14,330) (391,642) (279,996)
Principal payments on lease payable 13,800 (28,226) (11,956)
Loan issuance costs - (54,144) -
Cash dividends (332,581) (330,613) (324,487)
---------------- ------------------- ------------------
Net cash provided by financing activities 785,832 11,607,816 5,713,080
---------------- ------------------- ------------------
Net (decrease) increase in cash and cash equivalents (553,233) 299,960 (444,355)
Cash and cash equivalents at beginning of year 930,163 630,203 1,074,558
---------------- ------------------- ------------------
Cash and cash equivalents at end of year $ 376,930 $ 930,163 $ 630,203
================ =================== ==================
Supplemental cash flow information:
Interest paid, net of interest capitalized $ 2,134,021 $ 1,626,963 $ 823,863
================ =================== ==================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997
1. Summary of Significant Accounting Policies
Organization
Lockhart Caribbean Corporation (LCC) is organized as a United States Virgin
Islands corporation engaged in owning, developing and leasing commercial real
estate. LCC leases developed land, and retail and office space to customers
primarily under long-term leases. The accompanying consolidated financial
statements include the accounts of LCC and its wholly-owned subsidiaries H.E.
Lockhart Management, Inc. (HELM) and Lockhart Realty, Inc. (LRI). Significant
intercompany balances and transactions have been eliminated in consolidation.
On July 5, 1997, the shareholders of The Lockhart Companies Incorporated (LCI)
voted to restructure and recapitalize the Company and to offer common stock to
the public in an initial public offering to be registered with the Securities
and Exchange Commission. In connection with the restructuring and
recapitalization, LCI changed its name to Lockhart Caribbean Corporation on
August 22, 1997. On the same date, the shareholders of LCI exchanged each of
their shares for 9.7 shares of Class B common stock of LCC. The transaction has
been accounted for in a manner similar to a pooling-of-interests and,
accordingly, the financial statements as of and for the years ended December 31,
1996 and 1995 have been restated to give retroactive recognition to this
transaction. Initial public offering expenses, consisting primarily of legal
fees, amounting to approximately $463,000 were capitalized at December 31, 1997.
On February 4, 1998, LCC's registration statement was declared effective by the
U.S. Securities and Exchange Commission and certain state regulatory
authorities. The Company started conducting its public offering primarily over
the World Wide Web.
Use of Estimates
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles which requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments with a
maturity of three months or less when purchased. Cash equivalents amounted to
$74,500 and $313,400 at December 31, 1997 and 1996, respectively, and consisted
primarily of money market instruments.
F-7
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Construction-in-Progress
Construction-in-progress consists primarily of costs (including applicable
property taxes and interest) incurred relating to certain renovation and
rebuilding projects. These costs are included in operating property when the
projects are completed.
Operating Property
Operating property is stated on the basis of cost. LCC provides for depreciation
of operating property using the straight-line method for financial reporting
purposes and the modified accelerated cost recovery system for income tax
purposes over their estimated useful lives, which range from 5 to 31.5 years.
Expenditures for maintenance and general repairs are charged to expense as
incurred, whereas major improvements are classified as additions to operating
property.
Capitalized Interest
Interest is capitalized as a component of the cost of operating property
constructed. In 1997 and 1995 interest amounting to $6,200 and $97,600,
respectively, was capitalized. No interest was capitalized in 1996.
Deferred Revenue
Amounts received from lessees for lease acquisitions are deferred and amortized
over the term of the lease on the straight-line method.
Lease Termination Costs
Lease termination costs are charged to operations as incurred.
Deferred Financing Costs
Deferred financing costs represent costs incurred related to the issuance of
debt and are amortized over the term of the related debt. Deferred financing
costs at December 31, 1997 and December 31, 1996 are summarized as follows:
1997 1996
--------------- ---------------
Deferred financing costs $508,189 $534,250
Less accumulated amortization 153,682 26,061
=============== ===============
Deferred financing costs, net $354,507 $508,189
=============== ===============
F-8
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for cash and cash equivalents approximate those assets' fair values.
Note receivable: The carrying amount reported in the balance sheet approximates
fair value due to the underlying collateral on the note.
Mortgage and other notes payable: The carrying amounts of the mortgage notes,
which bear interest based on the financial institution's prime rate, approximate
fair value due to the periodic repricing of the interest rates. The carrying
amounts of the fixed rate mortgage note, the installment note, and other notes
payable approximate fair value based on discounted cash flow analyses.
2. Recent Accounting Pronouncements
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. The Company will adopt SFAS No. 130 for the year ending
December 31, 1998.
Segment Disclosures
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that the public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. The Company will adopt SFAS No. 131 for the year ending
December 31, 1998.
F-9
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Accounts and note receivable
In 1989, HELM sold a parcel of land and received a promissory note for $101,000
secured by a first priority mortgage on the property. No interest was accrued
for the years ended December 31, 1997, 1996 and 1995. Accrued interest as of
December 31, 1996 amounted to $73,300. The note was settled on March 14, 1997
for $169,000.
On October 3, 1997 the Company executed a Stock Purchase Agreement to purchase
all the outstanding common stock of Premium Finance Company of the V.I., Inc.
(PFC) and its wholly-owned subsidiary Premium Finance Company (E.C.) Ltd.
(PFC-EC) for $687,500. PFC and PFC-EC finance insurance premiums for individuals
and businesses in the U. S. Virgin Islands, the British Virgin Islands and
Anguilla, St. Maarten/St. Martin (Netherlands Antilles); Antigua, St. Vincent
and Grenada. In addition, the Company has agreed to guarantee a bank loan to
PFC-EC amounting to $200,000.
The Company also loaned $75,000 to PFC-EC which will be converted into a capital
contribution upon consummation of the acquisition of PFC. The outstanding
principal is payable on demand and interest income is accrued based on prime
rate (8.50% at December 31, 1997). The note is personally secured and pledged by
50,000 shares in the stock of PFC.
Accounts and note receivable are summarized as follows:
1997 1996
---------------- ---------------
Tenant accounts receivable $671,846 $406,066
Note receivable - PFC 78,187 -
Shareholders 101,193 97,568
Other 108,780 347,939
---------------- ---------------
960,006 851,573
Less allowance for doubtful accounts 188,014 97,800
---------------- ---------------
$771,992 $753,773
================ ===============
F-10
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Mortgage and Other Notes Payable
Mortgage notes payable at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
December 31
1997 1996
----------------- -----------------
<S> <C> <C>
First and second mortgage note payable to
a financial institution at prime plus
.5% (9.00% and 8.75% at December 31, 1997
and 1996, respectively) $14,472,438 $14,600,000
First mortgage note payable to a financial
institution at prime plus .5% (9.00%
and 8.75% at December 31, 1997 and 1996,
respectively) 4,460,683 4,500,000
First mortgage note payable to a financial
institution at prime plus 1.5% (10.00% and 9.75%
at December 31, 1997 and 1996, respectively) 737,723 813,394
First mortgage note payable to seller at 8.75% 4,635,737 4,672,065
Non-revolving line of credit promissory note to a
financial institution at prime plus .5% (9.00% and
8.75% at December 31, 1997 and 1996, respectively) 746,000 300,000
Demand notes payable to a financial institution
at prime plus .5% (9.00% at December 31, 1997) 500,000 -
----------------- -----------------
$25,552,581 $24,885,459
================= =================
</TABLE>
The $14.6 million mortgage note to HELM is payable in monthly installments of
$125,032 commencing in May 1997 after a six month interest-only payment period.
A final balloon payment of $14.1 million is due when the note matures in April
2000. However, if there are no events of default, the financial institution has
agreed to convert the balance outstanding on April 1, 2000 to a term loan
payable in 15 years and bearing interest at prime plus .5%. Proceeds of the note
were used to retire mortgage and installment notes issued for the renovation of
the Grand Hotel, the acquisition of Red Hook Plaza Shopping Center, and a term
loan secured by Drakes Passage properties, and to retire an interim loan of
$10.4 million, used
F-11
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Notes Payable (continued)
to acquire the Orange Grove Shopping Center and Fort Mylner properties, obtained
during 1996.
The mortgage note with an outstanding balance of $4.46 million on December 31,
1997 is payable in monthly installments of $38,537 commencing in May, 1997 after
an initial interest-only payment period. A final balloon payment of
approximately $4.3 million is payable when the note matures in April 2000.
However, if there are no events of default, the financial institution has agreed
to convert the balance outstanding on April 1, 2000 to a term loan payable in 15
years and bearing interest at prime plus .5%. The proceeds of the note were used
to liquidate the mortgage note issued for the renovation of Lockhart Gardens
Shopping Center. HELM is the borrower on this note.
The mortgage note to LRI with an outstanding balance of $737,723 at December 31,
1997 is payable in monthly installments of $6,306 plus interest through May,
1999 and a final payment of $630,520 due in June, 1999.
Proceeds of the mortgage note with a balance of $4,635,737 at December 31, 1997
were used to finance the acquisition of Red Hook Plaza Shopping Center. The note
is payable in monthly installments of $36,975 commencing in February 1996. A
final installment comprised of the principal sum then outstanding together with
any unpaid interest is payable when the note matures in January 2004. The note
is secured by a first priority mortgage on properties at the Red Hook Plaza
Shopping Center, a conditional assignment of leases and rents, and a guarantee
of LCC up to a maximum amount of $750,000. Red Hook Plaza, Inc., a wholly-owned
subsidiary of HELM, is the borrower on this note.
HELM obtained a $1 million non-revolving line of credit from a financial
institution. $746,000 and $300,000 was drawn on the line of credit as of
December 31, 1997 and 1996, respectively. The balance outstanding under the line
of credit is due and payable in April 2000. However, if there are no events of
default, the financial institution has agreed to convert the balance outstanding
on April 1, 2000 to a term loan payable in 15 years and bearing interest at
prime plus .5%. Interest is accrued on the unpaid balance at .5% above the
institution's prime rate and is payable monthly.
The proceeds from the $500,000 demand notes to HELM and LRI were used for the
development of Lockhart Mall at Lockhart Gardens Shopping Center and the Market
Square East development project. The demand notes are payable on demand and
interest is paid in variable monthly installments. Interest is computed based on
the institution's prime rate (8.50% at December 31, 1997) plus .5%. The demand
notes represent advances to HELM and LRI until the final closing of two
construction loans ($1.8 million for Market Square East and $577,000 for
Lockhart projects) already committed by a financial institution.
F-12
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Notes Payable (continued)
The financial institution granted a moratorium on principal payments of the
three mortgage notes due to the effects of Hurricane Marilyn. The moratorium
period was from November 1995 to July 1996 for the $3.7 million mortgage to
HELM, and from November 1995 to January 1996 for the $1.9 million mortgage to
HELM and the $883,000 mortgage to LRI. The principal payments during the
moratorium period were added to the balloon payments due when the notes were
scheduled to mature.
Installment Notes
In 1990, HELM purchased a lease on its Drake's Passage property through an
installment note payable. The note was scheduled to mature in 1997. The
acquisition of the lease was recorded as a capitalized asset at the present
value of the acquisition cost. The capitalized asset and discount are being
amortized over the seven year term of the installment note. The note was
liquidated in 1996 with the proceeds of the $14.6 mortgage note. As of December
31, 1997, the lease was fully amortized.
In February 1997, HELM purchased a vehicle for $13,800 through an installment
note payable. The note matures on January 1, 2002 and is payable in monthly
principal installments of $230 plus interest at 1.25% over prime rate (9.75% at
December 31, 1997).
In July, 1996, HELM purchased a vehicle for $59,000 through an installment note
payable. The note matures on June 1, 2001 and is payable in monthly principal
installments of $983 plus interest at 1.25% over prime rate (9.75% at December
31, 1997).
Line of Credit
On August 1, 1997, LCC obtained an additional line of credit amounting to
$400,000 from a financial institution. $343,723 has been drawn on the line of
credit as of December 31, 1997. The line of credit expires on July 31, 1998.
Advances under the line of credit will bear interest at the institution's prime
rate (8.5% at December 31, 1997).
Principal payments of notes payable for the five years subsequent to December
31, 1997, and in the aggregate, are as follows:
1998 $ 1,243,419
1999 1,014,963
2000 19,175,966
2001 65,063
2002 56,407
Thereafter 4,397,988
---------------------
$25,953,806
=====================
F-13
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Income Taxes
At December 31, 1997, the Company has operating loss carryforwards of
approximately $1,650,000 and $1,792,000 available to offset future taxable
income through the years 2012 and 2011, respectively.
At December 31, 1997 and 1996 net deferred income taxes (liabilities) consisted
of the following:
1997 1996
-------------- ----------------
Depreciation $ 638,014 $ 632,004
Provision for doubtful accounts receivable 82,601 38,676
Basis of operating property (2,788,285) (2,788,285)
Contributions carry-forward 95,175 25,295
Deferred revenue 74,800 -
Operating loss carry-forward 1,248,803 670,260
-------------- ----------------
$ (648,892) $(1,422,050)
============== ================
The differences between income taxes at the statutory rate of 37.4% and the
income tax provision (benefit) in the accompanying statements of operations
amount to $27,025, $28,021 and $20,148 for the years ended December 3, 1997,
1996 and 1995, respectively, and are due to nondeductible expenses and
miscellaneous items.
6. Leases
The Companies receive rental income from leases for retail and office building
space and ground leases to tenants under noncancelable lease agreements which
expire at various dates. Five year renewal options are available with most
leases. The leases provide for minimum annual rental payments plus adjustments,
if applicable, for certain additional costs incurred by the lessor and/or a
percentage of gross sales. Included in rental income for the years ended
December 31, 1997, 1996 and 1995 are $52,000, $77,000 and $100,000,
respectively, of rent attributable to a percentage of tenants' gross sales.
At December 31, 1997, the approximate future minimum rental income over the next
five years under the lease agreements were as follows:
1998 $ 4,649,000
1999 5,106,000
2000 5,279,000
2001 5,260,000
2002 5,469,000
-------------------
Aggregate future minimum rental income $25,763,000
===================
F-14
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Lease Termination and Deferred Revenue
In July 1997, Woolworth Corporation (Woolworth) decided to close its department
store operations throughout the United States, including the U.S. Virgin
Islands, and as of October 31, 1997, ceased retail sales at Lockhart Gardens
Shopping Center. Woolworth's lease did not expire until 2001, and it was
obligated to make base rental payments and tenant reimbursements until lease
expiration. The Company, through H.E. Lockhart Management, Inc., negotiated a
lease termination agreement. The new tenant that took possession of the space
occupied by Woolworth reimbursed the Company for the payment made to Woolworth.
The amount received from the Tenant for lease acquisition has been deferred and
will be amortized over the initial term of the lease on the straight-line
method.
8. Transactions with Related Parties
The amounts from shareholders are interest bearing and have no specific
repayment terms. However, if the maximum offering of $13 million is sold, the
Company will use approximately $525,000 of the last one million raised to
repurchase approximately 80,769 shares of Class B Common Stock from certain
Class B Stockholders including those holding notes payable to the Company. Those
shareholders holding notes payable to the Company have agreed to use a portion
of the proceeds from the sale of shares to the Company to repay their
indebtedness to the Company.
A shareholder of LCC and member of the Board of Directors is also a partner of a
law firm which renders legal services to LCC. During the years ended December
31, 1997, 1996 and 1995 fees paid to the law firm amounted to approximately
$147,000, $201,000 and $100,000, respectively.
In November 1997, HELM purchased a vehicle for $23,000 for one of the major
shareholders of the Company.
9. Employee Benefit Plan
The Company, through HELM, sponsors a defined-contribution retirement benefit
plan, subject to ERISA, that covers substantially all employees. The plan
provides that the Company will match the employee-directed contributions up to a
maximum of $500. The Company's contributions pursuant to the plan for the year
ended December 31, 1997 were approximately $16,600.
10. Dividends
Dividends payment dates are scheduled for the last day of each month, with the
per share amount paid per dividends determined by the Board of Directors at its
quarterly meetings. A dividend of $332,581 was declared and paid to Class B
shareholders for the entire 1997 fiscal year.
F-15
<PAGE>
Lockhart Caribbean Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Impact of Year 2000 - Unaudited
The Company is assessing the modifications or replacements of its software that
may be necessary for its computer systems to function properly with respect to
the dates in the year 2000 and thereafter. The Company does not believe that the
cost of either modifying existing software or converting to new software will be
significant or that the year 2000 issue will pose significant operational
problems for its computer systems.
12. Subsequent Events
On March 1, 1998, the Company increased its revolving line of credit from a
financial institution from $400,000 to $550,000. Advances under the line of
credit will bear interest at the institution's prime rate. The line of credit
expires on September 30, 1998.
On March 31, 1998, LRI sold 3.7 acres of land at Sugar Estate Park for $2.8
million. The Company used a portion of the proceeds from the sale to repay an
existing mortgage note payable with an outstanding balance of $737,723 as of
December 31, 1997.
F-16
<PAGE>
Exhibit List
*2.1 Plan of Recapitalization
*3.1 Amended and Restated Articles of Incorporation of Lockhart Caribbean
Corporation
*3.2 Amended and Restated Bylaws of Lockhart Caribbean Corporation
*3.3 First Amendment to the Amended and Restated Articles of Incorporation
of Lockhart Caribbean Corporation
*4.1 Reference is made to Exhibits 3.1 and 3.2 *4.2 Specimen Class A Common
Stock Certificate
*4.3 Warrant Agreement (including form of Warrant Certificate)
*4.4 Subscription Escrow Agreement
*10.1 Loan Agreement between H.E. Lockhart Management, Inc. and Banco Popular
de Puerto Rico dated October 21, 1996
*10.2 Stock Purchase Agreement, dated as of October 3, 1997, by and between
Carib National Group Inc., Richard E.W. Grant, The Grant Trust, Zenon
Development Corporation and Leslie and Cathy-Mae Sitaram and Lockhart
Caribbean Corporation
*10.3 Purchase and Sale Agreement between Red Hook Holding and Jedmacks, Inc.
and H.E. Lockhart Management, Inc. dated as of January 6, 1995
*10.4 Red Hook Plaza, Inc. Installment Note dated February 15, 1995
*10.5 Purchase and Sale Agreement between Miller Properties, Inc. and Fort
Mylner Properties, Inc. dated as of June 14, 1996
*10.6 Purchase and Sale Agreement between Miller Properties, Inc. and Golden
Orange Centers, Inc. dated as of June 14, 1996
*10.7 Lockhart Caribbean Corporation Long Term Incentive Plan
*10.8 Form of Lockhart Caribbean Corporation Dividend Reinvestment Plan
*21 Subsidiaries of Lockhart Caribbean Corporation
27.1 Financial Data Schedule for the years ended December 31, 1996 and 1997
- -------------------------------
* Incorporated by reference from the corresponding exhibit filed with the
Registrant's Registration Statement on Form S-11 (Commission File No. 333-
35105).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
LOCKHART CARIBBEAN CORPORATION
Date: May 4, 1998 By: /s/ John P. deJongh, Jr.
--------------------------
John P. deJongh, Jr., President
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: May 4, 1998 By: /s/ John P. deJongh, Jr.
--------------------------
John P. deJongh, Jr., President
Director (Principal Executive Officer)
Date: May 4, 1998 By: /s/ Cornel Williams
---------------------
Cornel Williams, Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
Date: May 4, 1998 By: /s/ George H.T. Dudley
------------------------
George H.T. Dudley, Co-Chairman of the
Board of Directors
Date: May 4, 1998 By: /s/ Wesley S. Williams, Jr.
-----------------------------
Wesley S. Williams, Jr., Co-Chairman
of the Board of Directors
Date: May 4, 1998 By: /s/ Lisa S. Curreri
---------------------
Lisa S. Curreri, Director
Date: May 4, 1998 By: /s/ Kathleen P. Goldberg
--------------------------
Kathleen P. Goldberg, Director
Date: May 4, 1998 By: /s/ William H. Hastie
-----------------------
William H. Hastie, Director
Date: May 4, 1998 By: /s/ Herbert E. Lockhart, III
------------------------------
Herbert E. Lockhart, III, Director
Date: May 4, 1998 By: /s/ John E. Oxendine
----------------------
John E. Oxendine, Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 377 930
<SECURITIES> 0 0
<RECEIVABLES> 672 406
<ALLOWANCES> (122) (32)
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,503 2,010
<PP&E> 38,029 37,231
<DEPRECIATION> (5,147) (4,002)
<TOTAL-ASSETS> 35,704 36,270
<CURRENT-LIABILITIES> 2,161 1,570
<BONDS> 25,954 24,943
0 0
0 0
<COMMON> 6,864 6,756
<OTHER-SE> (124) 1,578
<TOTAL-LIABILITY-AND-EQUITY> 35,704 36,270
<SALES> 0 0
<TOTAL-REVENUES> 5,107 4,217
<CGS> 0 0
<TOTAL-COSTS> 4,680 3,885
<OTHER-EXPENSES> 322 (58)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,249 1,676
<INCOME-PRETAX> (2,144) (1,286)
<INCOME-TAX> 774 453
<INCOME-CONTINUING> (1,369) (833)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,369) (833)
<EPS-PRIMARY> (0.16) (0.10)
<EPS-DILUTED> (0.16) (0.10)
</TABLE>
