<PAGE> 1
UNITED STATES
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, 1999
[ ] 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: 110-9305
REEVES TELECOM LIMITED PARTNERSHIP
(NAME CHANGED FROM REEVES TELECOM ASSOCIATES)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SOUTH CAROLINA 57-0700063
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
C/O GRACE PROPERTY MANAGEMENT, INC.
P.O. BOX 163, 55 BROOKVILLE ROAD
GLEN HEAD, NEW YORK 11545
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 686-2201
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
PARTNERSHIP UNITS NONE
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 ___
ON MARCH 17, 2000, THE REGISTRANT HAD OUTSTANDING 1,828,148 PARTNERSHIP UNITS.
SEE ITEM 5. THERE IS NO ACTIVE MARKET FOR THE PARTNERSHIP UNITS. WITH REGARD TO
RECENT SALES SEE ITEM 5. AS OF MARCH 17, 2000, NON-AFFILIATES HELD 1,187,803
PARTNERSHIP UNITS.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Reeves Telecom Limited Partnership (the "Registrant" or the
"Partnership") is a South Carolina Limited Partnership formed for the purpose of
accepting certain assets and liabilities from its predecessor corporation,
Reeves Telecom Corporation (the "Corporation"). The Corporation sold its
principal assets during the twelve-month period ended May 15, 1980 and
distributed cash and the limited partnership units of the Registrant to its
former shareholders as a liquidation distribution. The partnership units were
registered under the Securities Act of 1933 by the filing of a Registration
Statement pursuant to Form S-14 (File No. 2-66452) which became effective April
8, 1980 and pursuant to which a Proxy Statement/Prospectus dated April 14, 1980
was mailed to all shareholders. Reference is made to said Registration Statement
and said Proxy Statement/Prospectus for a description of the liquidation of the
Corporation and the formation of the Registrant. The Registrant was initially
organized October 25, 1979 but had only nominal assets and no liabilities until
May 15, 1980. To reflect a change in South Carolina law, Registrant's name was
changed from Reeves Telecom Associates to Reeves Telecom Limited Partnership on
January 21, 1987.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and other applicable securities laws. All statements other
than statements of historical fact are "forward-looking statements" for purposes
of these provisions, including but not limited to any statements of the plans,
strategies, and objectives of Management for the future. Although the
Partnership believes that the expectations reflected in any of its
forward-looking statements will prove to be correct, actual results could differ
materially from those projected or assumed in the Partnership's forward-looking
statements. The Partnership's future financial condition and results, as well as
any forward-looking statements, are subject to inherent risks and uncertainties
that are beyond the Partnership's control. The Partnership undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
GENERAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership's business may be categorized into two industry
segments: (i) owning, developing, selling, leasing, or otherwise dealing in real
estate, and (ii) owning and operating a golf course and country club. See the
audited financial statements for financial information about each segment.
-1-
<PAGE> 3
NARRATIVE DESCRIPTION OF BUSINESS
The principal asset of the Partnership is real estate for development
located in Boiling Spring Lakes, in Brunswick County, North Carolina, where the
Partnership also owns and operates a golf course and country club (see Item 2,
"Properties").
Prior to mid-1993, in view of limited resources, Management focused on
holding down costs until a bulk sale of all or substantially all of the assets
of the Partnership could be effectuated. Local real estate brokers were relied
upon to generate individual lot sales, and the golf course and country club were
leased to an operator. Under this arrangement, lot sales were slow and,
generally, operating expenses significantly exceeded revenue from such sales.
Were it not for cash generated from activities other than the sale of real
estate during those years, the Partnership would likely have become insolvent.
Beginning in June 1993, Management has focused on the sale of
individual lots and other means of generating revenue. The Partnership also
became increasingly involved in the management and operation of the golf course
and country club.
BOILING SPRING LAKES
- REAL ESTATE SALES
Revenue during the last five fiscal years ended December 31 are shown
on Table 1, below.
TABLE 1: REVENUE FROM REAL ESTATE SALES
<TABLE>
<CAPTION>
No. of Individual Lots Sold Other Total
---------------------------
Improved Unimproved Parcels Revenues
-------- ---------- ------- --------
<S> <C> <C> <C> <C>
Fiscal 1999 1 68 7 $555,441
Fiscal 1998 1 52 0 435,046
Fiscal 1997 2 55 0 411,609
Fiscal 1996 1 49 1 463,051
Fiscal 1995 0 37 0 209,055
</TABLE>
As used in Table 1, the term "individual lot" refers to a platted
residential lot comprising about 1/4 acre. The term "improved" refers to an
individual lot on which construction of house has been started and, in some
cases, completed. The term "unimproved" refers to an individual lot on which a
house has not yet been built. The term "other parcels" refers to unplatted
parcels, large tracts and commercial lots.
-2-
<PAGE> 4
During 1999, the Partnership sold one improved lot for approximately
$130,800, which generated a profit of approximately $11,200. In addition, the
Partnership sold four 1/2-acre unimproved commercial lots, one unplatted lot
comprising approximately 1 1/2 acres, and two 1/2-acre unplatted lots for an
aggregate sales price of approximately $56,800. During 1998, the Partnership
sold one improved lot for approximately $117,300, which generated a profit of
approximately $13,700. During 1997, the Partnership sold one improved lot for
$115,000, which generated a profit of approximately $20,000, and another for
$128,000 shortly after construction of the house had commenced, generating a
profit of approximately $17,100. Since the purchaser of this last mentioned
improved lot, and not the Partnership, bore substantially all the construction
cost of the house, for financial reporting purposes, the Partnership's revenues
reflect only the net proceeds received by the Partnership upon the sale of the
lot.
- FOX SQUIRREL COUNTRY CLUB
The Registrant is the owner and operator of Fox Squirrel Country Club
("Fox Squirrel"), a semi-private golf course and country club. Fox Squirrel's
18-hole golf course serves as the centerpiece of the Boiling Spring Lakes
development. Management believes that its attraction as a recreational facility
to those who are considering purchasing or building a home in the region allows
for more lot sales and a higher sales price per lot than would be the case in
the absence of such a facility.
The Partnership's revenue and operating income (loss) from Fox Squirrel
for the last five fiscal years are shown on Table 2, below.
TABLE 2: REVENUE AND OPERATING INCOME (LOSS)
FROM FOX SQUIRREL COUNTRY CLUB
<TABLE>
<CAPTION>
Operating
Revenue Income (Loss)
------- -------------
<S> <C> <C>
Fiscal 1999 $ 355,506 $(60,903)
Fiscal 1998 437,436 (34,783)
Fiscal 1997 373,972 34,206
Fiscal 1996 358,580 8,126
Fiscal 1995 340,699 41,522
</TABLE>
In November 1995, the Partnership hired a new manager and golf pro of
Fox Squirrel, replacing the former manager, who resigned. The new manager also
leased the kitchen and dining area in the club house from the Partnership, which
paid for certain improvements to the
-3-
<PAGE> 5
kitchen and dining area. Although the lease provided for the payment to the
Partnership of monthly lease payments in varying amounts, the Partnership waived
most lease payments to enable the dining service to become financially
established. In February 1998, the manager and the Partnership agreed to the
termination of the manager's employment agreement and related agreement to lease
the kitchen and dining area. The Partnership agreed, among other things, to
purchase certain assets from, and assume certain liabilities of, the manager in
exchange for cash consideration to the manager of $49,404. As a result of the
foregoing, the Partnership became the operator of the dining service.
- OTHER
From time to time the Partnership generates revenue from sources other
than real estate sales and Fox Squirrel, including, for example, the sale of
timber and pine straw on certain unsold lots. While additional revenue from such
sources continues to be sought as a means of supplementing revenue from lot
sales, such activities have not been a material source of revenue during the
past four years due principally to the harvesting of seasoned timber performed
in past years. The amount of revenue generated from the sale of timber and pine
straw during the last five fiscal years is shown on Table 3, below.
TABLE 3: REVENUE FROM SALE OF TIMBER
AND PINE STRAW
<TABLE>
<CAPTION>
Revenue
<S> <C>
Fiscal 1999 $ 1,266
Fiscal 1998 -0-
Fiscal 1997 694
Fiscal 1996 12,866
Fiscal 1995 35,920
</TABLE>
Since the 1970's, health standards at Boiling Spring Lakes have become
increasingly stringent regarding septic tanks and on-site sewage disposal. It is
estimated that 70% to 75% of the property which would have complied with
applicable rules and regulations a number of years ago no longer meets present
day health standards. This has had a detrimental effect on the operations of the
Partnership. In a few cases the problem could be cured by the use of drains, or
by the scraping away of hard pan and adding fill dirt. In most instances,
however, health departments have declared a majority of the areas as
irremediable by ordinary measures. In such cases, the only solution would be to
install area-wide sewer systems. While the Partnership does not have the
resources to install a sewer system covering most or all of the entire
development, a small multi-user system has been installed on certain lots zoned
for commercial use. Depending upon the Partnership's financial resources, the
market for real
-4-
<PAGE> 6
estate in and around Boiling Spring Lakes and economic conditions generally,
among other factors, Management may consider installing similar multi-user
systems in other areas of the development in the future but currently has no
plans to do so.
PIMLICO PLANTATION
The Partnership currently owns two lots at Pimlico Plantation. No lot
sales or revenue from lot sales have been recorded during the last five fiscal
years. In view of the foregoing, revenue from the sale of lots at Pimlico
Plantation in future years is expected to represent, at best, a negligible
percentage of total revenue.
SEASONALITY
The sale of real estate in North Carolina is seasonal. The Partnership
has generally experienced slower than average lot sales in the period from
November to January, inclusive.
Although played year-round, depending upon the climate and weather,
golf is largely a warm weather sport. Accordingly, revenue at Fox Squirrel is
generally highest in the period from March to September, inclusive. Revenue is
generally lowest in the period from November to February, inclusive, when
extensive seeding and course repair work is usually performed.
DEPENDENCE UPON CUSTOMERS
The Partnership is not dependent in any respect upon one or a few
customers, the loss of any one of which might significantly affect the financial
results of the Partnership.
COMPETITION
The real estate market in Brunswick County, North Carolina is
extremely competitive. Prospective residential property owners may buy from real
estate developers, who generally sell lots suitable for building but who may
also sell improved properties, existing homeowners looking to relocate, and
others. Property values are dependent upon, among other factors, proximity to
and the nature and quality of recreational facilities, retail shopping,
commercial sites and schools, and the availability of county water (as opposed
to well water) and sewer service (as opposed to septic systems).
Many real estate developments in the market in which the Partnership
operates provide recreational facilities, such as a golf course, lakes and/or
swimming pools, and tennis courts. In many cases, depending upon the financial
resources of the particular developer, such
-5-
<PAGE> 7
facilities are more extensive and/or more varied than the Partnership's
facilities, and the golf courses are, in some instances, the sites of
professional championship tournaments. Lots associated with such facilities
generally command higher sales prices than lots owned by the Partnership.
Management believes that the Partnership can compete effectively against other
real estate developers and golf course operators, many of whom are believed to
have substantially greater resources than the Partnership, principally on the
basis of price and, depending upon the amount of cash generated from lot sales,
by making selective improvements to recreational facilities, including Fox
Squirrel.
LIQUID ASSETS AND RESERVES
As of December 31, 1999, the Partnership held $129,954 in cash. Current
liabilities as of this date totaled $2,015,468.
The Partnership Agreement obligates the General Partner to distribute
Distributable Cash (as such term is defined in the Partnership Agreement).
Distributable Cash excludes, among other items, reserves established for working
capital, contingent liabilities, taxes, debt service, repairs, replacements,
renewals, capital expenditures or other purposes consistent with the Partnership
Agreement. Such reserves are used solely for calculating Distributable Cash and
are not treated as deductions from income for accounting purposes. In Fiscal
1995 a reserve of $250,000 was established to fund primarily certain capital
improvements at Fox Squirrel. In Fiscal 1996, reserves totaling $200,000 were
established to fund, principally, certain capital improvements at Fox Squirrel
and certain capital projects within the development, including a multi-user
septic system installed on eight lots zoned for commercial use. In each of
Fiscal 1997 and 1998, reserves totaling $200,000 were established for
substantially the same purposes. During 1999, a reserve of $150,000 was
established to purchase and refurbish a residential property for resale. Also
during 1999, a reserve of $50,000 was established for certain capital
improvements at Fox Squirrel.
See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," for further discussion of factors
affecting liquidity.
ITEM 2. PROPERTIES
BOILING SPRING LAKES
Boiling Spring Lakes began as a 14,000-acre development which was
commenced by the Corporation in 1962. Part of the tract is now within the City
of Boiling Spring Lakes, which has approximately eighteen hundred residents. The
city is in Brunswick County, 25 miles south of Wilmington, North Carolina, and 8
miles west of Southport, placing the city in the northern portion of the coastal
corridor connecting Wilmington, North Carolina and Myrtle Beach, South Carolina.
-6-
<PAGE> 8
The Registrant presently owns the following real estate: (1) 159.9
acres comprising a surveyed 18-hole sprinklered golf course, club house and
maintenance building, together known as Fox Squirrel; (2) 120 building lots
located near the golf course which have been surveyed and platted and are
suitable for building; (3) 194 acres surrounding the golf course which could be
developed; (4) 3,167 surveyed and platted lots of which approximately 8% are
suitable for building, 6% are conditionally suitable for building and the
balance is unsuitable for building; (5) approximately 4,000 acres of wetlands
and woodlands which have no development potential; and (6) a sales office.
During 1988, the Partnership reduced the carrying value of the Boiling
Spring Lakes property as a result of an appraisal obtained in December 1988 (see
Note 3 of financial statements). During 1993, 1995 and 1998, the Partnership
received updated appraisals of the Boiling Spring Lakes property. Based upon the
updated appraisals, no additional reduction to the carrying value was made.
Management intends to emphasize the sale of individual lots at Boiling
Spring Lakes, concentrating first on lots situated on existing paved roads.
Depending upon the Partnership's financial resources, cost estimates, and
projected sales prices, among other things, Management may undertake the
development of additional sections of Boiling Spring Lakes.
Since 1995, the Partnership has undertaken certain improvements to Fox
Squirrel, including paving the 25,360 linear feet of cart paths, building a new
maintenance shed, and refurbishing both the club house and cart shed. Depending
upon the Partnership's financial resources, revenues from Fox Squirrel, and cost
estimates, among other things, Management may undertake additional improvement
projects at Fox Squirrel during Fiscal 2000.
In December 1995, Management initiated a project involving the
construction of a house on a lot owned by the Partnership and the immediate
marketing of the house and lot for sale. In January 1996 the Partnership
obtained from a local bank a line of credit of $85,000 to finance the
construction of the house. The property was sold in June 1996 for approximately
$113,000 and the outstanding borrowing under the line of credit was repaid at
closing, resulting in a profit to the Partnership of approximately $19,400,
greater than would have been the case if the lot had been sold unimproved. The
project was continued in 1997 with a higher line of credit and the Partnership
sold two improved lots during the year; the first was sold for $115,000 and
generated a profit of approximately $20,000 after repayment of outstanding
borrowing under the line of credit, the second was sold for $128,000 and
generated a profit of approximately $17,100. Since construction of the house had
barely commenced at the time of the sale of the last mentioned property, there
was no outstanding borrowing under the line of credit at the time of sale and,
for financial reporting purposes, the Partnership's revenues reflect only the
net proceeds received by the Partnership upon the sale. In Fiscal 1998, the
Partnership sold one improved lot for $117,300, generating a profit of
approximately $13,700 after payment of construction-related debt and other
expenses. During Fiscal 1999, the Partnership sold one improved lot for
approximately $130,800, generating a
-7-
<PAGE> 9
profit of approximately $11,200 after repayment of construction-related debt and
other expenses. Management may undertake similar projects during Fiscal 2000.
During 1995 and 1996, the Partnership conceived plans for a small,
phased development project involving the construction of 23 patio homes on 13
contiguous lots owned by the Partnership as a means of supplementing revenue
from lot sales. The City of Boiling Spring Lakes granted its approval for the
development in 1996. Construction was delayed for nearly two years due to new
state regulations, promulgated after the city granted its approval but before
construction on the patio homes commenced, which required the Partnership to
file storm water drainage plans with respect to the patio homes project. The
storm water drainage plans were filed during 1997 and final approval was granted
during 1998. The Partnership has postponed construction indefinitely due to the
strong regional real estate market, which has driven patio home construction
costs above what Management believes is prudent. Management expects that, once
construction begins, the Partnership will have one or two patio homes under
construction at any given time, and that once a house is sold, construction will
begin immediately on an additional house.
In August 1998, the Partnership entered into an agreement with The
Nature Conservancy ("TNC") pursuant to which TNC would acquire approximately
4,833 acres of the Partnership's land in Boiling Spring Lakes for an aggregate
sale price of $2,174,850. The acreage and sale price were to be subject to a
survey to be completed prior to closing. Delays in completing the surveys and
the title work have pushed the closing date until, perhaps, the second quarter
of fiscal 2000. Moreover, the transaction may involve two or more closings, and
may include somewhat more land and a somewhat higher aggregate sales price than
originally agreed.
PIMLICO PLANTATION
Pimlico Plantation is situated in Berkeley County, near Charleston,
South Carolina. Pimlico was developed by the Corporation and its predecessors,
and as a result of land sales has been largely wound down. The Registrant
currently owns only two residential lots, comprising an aggregate of
approximately 3/4 acre, at this location. The Registrant believes that the land
has limited value.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not currently a party to any material pending legal
proceedings. From time to time the Partnership has been and may become a party
to ordinary routine litigation incidental to its business. Management believes
that the potential liability to the Partnership from any of such proceedings is
immaterial.
-8-
<PAGE> 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of unit holders during Fiscal 1999.
-9-
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY MATTERS
As of December 31, 1999 there were 1,928 recorded holders of
partnership units, including 596 registered holders of an aggregate of 67,784
shares of Corporation common stock which have yet to be exchanged for
partnership units. The total number of record holders is not substantially
changed from December 31, 1998. The units are not registered on any exchange,
and there is only a limited over-the-counter market for the units. It is not
anticipated that there will ever be an active public market for the units.
It is the Partnership's experience that revenues are highly variable
and may not be sufficient in future years to cover expenses and necessary
capital expenditures and that, in the absence of enhanced prospects for the
development as a whole, a bulk sale of assets for cash is extremely difficult to
achieve. See Part I, Item 2, Properties - Boiling Spring Lakes. Absent such a
sale, Management believes that the best use of the current cash balance and cash
surpluses, if any, generated in future fiscal years is to improve the overall
value of the Partnership's assets by (i) making certain improvements at Fox
Squirrel, thereby increasing the attractiveness of Fox Squirrel as a
recreational facility to prospective homeowners, (ii) undertaking certain
infrastructure and other improvements in the development, (iii) undertaking on a
limited scale home construction on lots owned by the Partnership to demonstrate
the viability of larger scale building programs, and (iv) paying down accrued
expenses. Management believes that this plan will, in future years, result in,
among other things, an increase in the number of lots sold, a higher average
sales price per lot, and higher operating income at Fox Squirrel and the
Partnership as a whole. There can be no assurance, however, that sufficient cash
will be generated from operations to successfully implement Management's plan.
Consistent with such plan and in view of the costs associated with a
distribution to all partners, Management believes it would be impractical and
imprudent to make a general distribution prior to the sale of a major asset, the
bulk sale of all or substantially all of the Partnership's assets, or such time
as the Boiling Spring Lakes development, as a whole, has been established to
operate at a level sufficient to consistently generate revenues in excess of
expenses and capital expenditures. However, from time to time in future periods,
in accordance with applicable Securities laws, the Partnership may utilize
excess cash by repurchasing partnership units, either in privately negotiated
transactions or through open market purchases, although there are currently no
plans to do so. Since the amount of excess cash available for such purpose
cannot be estimated at this time due to the highly variable nature of the
Partnership's cash flow, there can be no assurance as to the number of
partnership units which will actually be repurchased, if any such repurchases
will, in fact, occur, or the prices at which such repurchases, if any, will be
made. As of the date of this Form 10-K, no filings have been made with the
Securities and Exchange Commission with respect to any such planned repurchases.
-10-
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth in Tables 4 and 5, below, has
been derived from the historical audited financial statements of the
Partnership. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited financial statements and related notes thereto.
TABLE 4: SELECTED INCOME STATEMENT DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Property sales $ 555,441 $ 435,046 $ 411,609 $ 463,051 $ 209,055
Country Club revenue 355,506 437,436 373,972 358,580 340,699
Other revenue 2,501 1,732 3,303 3,756 8,880
----------- ----------- ----------- ----------- -----------
Total revenue 913,448 874,214 788,884 825,387 558,634
Expenses:
Direct cost of property sold 163,114 148,013 113,611 40,201 95,992
Direct cost of Country Club 34,366 51,802 -0- -0- -0-
SG&A of Country Club 371,292 420,417 339,766 350,454 299,177
SG&A 494,740 390,604 391,067 432,767 293,277
Depreciation 66,114 63,659 61,565 50,756 39,190
Interest 162,163 135,634 112,526 225,200 14,627
----------- ----------- ----------- ----------- -----------
Total expenses 1,291,789 1,210,129 1,018,535 1,099,378 742,263
----------- ----------- ----------- ----------- -----------
Operating loss (378,341) (335,915) (229,651) (273,991) (183,629)
Other income, net 1,266 -0- 694 13,547 43,685
----------- ----------- ----------- ----------- -----------
Net loss $ (377,075) $ (335,915) $ (228,957) $ (260,444) $ (139,944)
=========== =========== =========== =========== ===========
Loss per unit $(0.21) $(0.18) $(0.13) $(0.14) $(0.08)
</TABLE>
Some amounts in Table 4 for prior years are reclassified to conform to
the presentation. Such reclassification has not resulted in a change in
operating loss or net loss.
-11-
<PAGE> 13
TABLE 5: SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets $ 134,861 $ 82,032 $ 148,131 $ 133,919 $ 73,860
Land held for sale and related
buildings and equipment, net 960,480 1,025,256 911,197 1,037,678 910,183
Other assets -0- -0- -0- -0- 1,201
Total assets 1,095,341 1,107,288 1,059,328 1,171,597 985,244
Current liabilities 2,015,468 1,633,202 1,235,189 997,568 531,467
Long-term debt 1,432 18,570 32,708 153,641 172,945
Total liabilities 2,016,900 1,651,772 1,267,897 1,151,209 704,412
Partners' capital (deficit) (921,559) (544,484) (208,569) 20,388 280,832
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the audited
financial statements of the Partnership and the notes thereto which are attached
to this report. Certain amounts in prior years have been reclassified.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
For the 12 months ended December 31, 1999 and 1998, revenue from the
sale of real estate was $555,441 and $435,046, respectively. Management
attributes the 28% increase in revenue principally to a higher number of
unimproved residential lots sold in 1999 than in 1998, 68 as compared to 52, and
to the sale during 1999 of seven nonresidential tracts, whereas no such tracts
were sold in 1998. The increase in the number of lots sold, in turn, is
primarily attributable to a stronger regional real estate market during 1999
than in past years.
Revenue from Fox Squirrel for Fiscal 1999 and 1998 was $355,506 and
$437,436, respectively. Management attributes the 19% decrease principally to
unusually inclement weather during the fall of 1999. In mid-September, Hurricane
Floyd made landfall not far from Boiling Spring Lakes, and caused record amounts
of flooding and wind damage throughout North Carolina. In October, rain from
Hurricane Irene added to the flooding problem, which resulted in Fox Squirrel
being closed for approximately three weeks during what is normally a busy
period. Revenues were also adversely affected, though to a lesser degree, by
increased competition in the form of new golf courses opening for business in
Brunswick County.
-12-
<PAGE> 14
Selling, general and administrative expenses for 1999, exclusive of
those relating to Fox Squirrel, were $494,740, compared to $390,604 in 1998.
Management attributes the increase principally to higher legal, accounting and
auditing fees, and consulting fees relating to environmental matters.
Selling, general and administrative expenses at Fox Squirrel were
$371,292 for 1999, compared to $420,417 for 1998. Management attributes the
decrease principally to lower salaries and wages, since amounts for 1998
included payments to the former manager of Fox Squirrel, whereas during 1999 no
such expenses were incurred.
Direct cost of property sold in 1999 was $163,114, compared to $148,013
in 1998. Management attributes the increase substantially to the increase in the
number of lots sold. Direct cost of Country Club revenue in 1999 was $34,366,
compared to $51,802 in 1998. Management attributes the decrease principally to
the mix of merchandise sold at the Pro Shop, which during 1999 was primarily
golf balls, gloves, hats and shirts and during 1998 included costlier items,
such as golf shoes and golf bags. Depreciation for 1999 was $66,114, an increase
of less than 4% over 1998, which increase Management attributes principally to
capital expenditures made during 1998. Interest expense for 1999 was $162,163,
compared to $135,634 for 1998. Management attributes the increase in interest
expense primarily to a higher average outstanding balance of indebtedness during
1999 to the General Partner and its affiliates. The general partner and its
affiliates charge the Partnership interest on accrued but unpaid expenses
outstanding.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
For the 12 months ended December 31, 1998 and 1997, revenues from the
sale of real estate were $435,046 and $411,609, respectively. Management
attributes the increase in revenue principally to the recorded sales price for
the improved lot sold in 1998 being higher than that for the improved lot sold
in 1997. The number of unimproved lots sold in 1998 was 52, compared to 55 in
1997. The decrease in lots sold was offset by a higher average sales price per
lot, which itself is due primarily to the relative mix of lots sold as to
location and asking price.
Revenue from Fox Squirrel for Fiscal 1998 and 1997 were $437,436 and
$373,972, respectively. The principal reason for the increase is the inclusion
in 1998's figure of revenue totaling $82,033 from the Pro Shop and dining
service at Fox Squirrel, which have been operated by the Partnership since
February 1998. Revenue from concessions and the dining service was $1,000 in
1997. Revenue from greens fees and cart rentals declined 12% due to lower number
of rounds played by nonmembers, while dues from members increased 7%.
Selling, general and administrative expenses for 1998, exclusive of
those relating to Fox Squirrel, were $390,604, compared to $391,067 in 1997, for
a change of less than 1%. Selling, general and administrative expenses at Fox
Squirrel were $420,417 for 1998,
-13-
<PAGE> 15
compared to $339,766 for 1997. Management attributes the increase in expenses
principally to the Partnership's operation of the Pro Shop and Dining Service at
Fox Squirrel since February 1998. Maintenance-related expenditures were 13%
lower than in 1997 in part due to weather conditions being more favorable in
1998 than the prior year, and in part to the recent replacement of certain aged
equipment which required frequent and expensive repairs. Insurance expense
increased substantially over 1997 due principally to the need for liability
insurance following the Partnership's assuming operation of the dining service
in 1998.
Direct cost of property sold in 1998 was $148,013, compared to $113,611
in 1997. Management attributes the increase to higher costs associated with
houses built for resale and to the relative mix of lots sold. Depreciation
increased modestly as a result of capital expenditures made in 1997. Interest
expense for 1998 was $135,634 compared to $112,526 for 1997. Management
attributes the increase primarily to a higher average outstanding balance of
indebtedness during 1998 to the General Partner and its president and
affiliates. The general partner and its affiliates charge the Partnership
interest on accrued but unpaid expenses outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership requires cash primarily for the payment of overhead and
operating expenses and capital expenditures incurred in connection with real
estate sales and the operation of Fox Squirrel. Historically, the Partnership
has met its liquidity requirements by accruing general partners fees and certain
other fees and expenses payable to the General Partner and its affiliates,
selling certain non-real estate assets, and, from time to time, by borrowing
from local banks or the General Partner and/or its affiliates. Management
anticipates that existing cash balances, cash flow generated from operations and
borrowings will be sufficient to fund operations for the next few fiscal years,
by which time it is expected that the Partnership will be generating sufficient
cash flow from operations to begin paying down accrued expenses. The Partnership
may seek to increase the amount of its credit facility, negotiate additional
credit facilities, issue debt on such terms and conditions as the General
Partner deems prudent, or seek other forms of debt or equity financing as the
General Partner deems appropriate.
The Partnership finances construction of houses for sale on lots owned
by the Partnership with construction loans obtained through a line of credit
established with a local bank. From time to time, the bank will make payments to
the contractor for work performed, increasing the amount of the construction
loan and decreasing by the same amount the total available for future borrowing
under the line of credit. Borrowing under the line of credit in respect of any
house is repaid at closing of the sale. Under the terms of the line of credit,
if the house is unsold at the time of its completion, interest will accrue for
up to one year after the date of the first draw, after which time the
construction loan converts to a fixed-rate loan. At any given time, the
Partnership has had not more than one construction loan outstanding, with a
maximum balance, including accrued interest, not exceeding $110,000, and has
-14-
<PAGE> 16
generally succeeded in selling the house and lot on which it stands prior to the
completion of construction. In 2000 and subsequent years, depending upon market
conditions and other factors, the Partnership may have up to two such loans
outstanding at any given time and the maximum amount of any loan is not expected
to exceed $120,000. In March 1999, the Partnership borrowed $120,000 from a
local financial institution to finance the purchase of an improved residential
lot intended for resale.
During 1999, the Partnership used $263,927 of cash in operating
activities, compared to $247,980 during 1998. The increase is primarily due to
the Partnership's operation of the Pro Shop and dining service at Fox Squirrel
for all of fiscal 1999, compared to just eleven months of 1998.
Cash used in investing activities was $18,976 in 1999, compared to
$199,213 in 1998. Management attributes the 90% decrease to the timing of
expenditures related to the housing construction project.
Cash provided by financing activities in 1999 was $342,993, compared to
$368,926 in 1998. The 7% decrease is attributable to the timing of the
Partnership's drawings upon the line of credit relating to construction loans
and to higher accruals of expenses owed to the General Partner and its
affiliates.
IMPACT OF YEAR 2000
Year 2000 did not have a material impact upon the Partnership's
information systems, business or ability to operate in a well-controlled
environment.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable pursuant to Paragraph 305(e) of Regulation S-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14, "Exhibits, Financial Statement Schedules, and Reports on
Form 8-K," for response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements between the Partnership
and PricewaterhouseCoopers LLP on accounting and financial matters.
-15-
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF GENERAL PARTNER
<TABLE>
<CAPTION>
Period of Service as
Name Age General Partner Commenced
- ----------------------------------- -------------- -----------------------------
<S> <C> <C>
Grace Property Management, Inc. N/A May 15, 1980
</TABLE>
Grace Property Management, Inc. is a Delaware corporation engaged in
the business of real estate management. It is owed 50% by the Bank of
Butterfield Executor & Trustee Company, as trustee for John S. Grace, and 50% by
the Estate of Oliver R. Grace, Mr. Grace being a former director of Registrant's
predecessor.
INDEMNIFICATION OF EXECUTIVE OFFICERS
None
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Name Capacity General Partner's Fee
- ---------------------------------- ------------------ -----------------------
<S> <C> <C>
Grace Property Management, Inc. General Partner $ 175,000
</TABLE>
Except for $25,000 paid in April 1990, the Partnership has not paid the
General Partner its general partner's fee since January 1986, although they have
been provided for in the accompanying financial statements. As of December 31,
1999, general partner's fees accrued but not paid to Grace Property Management
totaled $931,000. The Registrant has no on-going plan or arrangement with
respect to future remuneration to Grace Property Management other than to accrue
interest (at an annual rate of 10%, compounded quarterly) on the unpaid balance
when cash flow is insufficient to pay general partner's fees. As of December 31,
1999, the Registrant had a group life insurance plan in place covering all
full-time employees of the Partnership located in Boiling Spring Lakes. The
Registrant has no pension or profit sharing plan but does provide for incentive
bonus compensation to certain managerial employees for meeting or exceeding
pre-designated budget targets. The Registrant has no options, warrants, or
appreciation rights outstanding. No Management person is indebted to the
Registrant.
-16-
<PAGE> 18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1999, the Partnership has 1,828,148 partnership
units issued and outstanding. Information with respect to the principal holders
of record known to the Partnership to beneficially own more than five (5%)
percent of the outstanding voting securities is set forth below.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class
- ----------------------------- --------------------------------- -------------
<S> <C> <C>
Estate of Oliver R. Grace 421,680 units are owned by the 23.1%
515 Madison Avenue Estate of Oliver R. Grace,
20th Floor Mr. Grace's widow and a
New York, NY 10022 company he formerly controlled(1)
</TABLE>
The General Partner owns 25,100 partnership units, representing
approximately 1.4% of all units issued and outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995 the Partnership borrowed $200,000 from Mr. John S. Grace,
president of the General Partner, in the form of a promissory note due June 1,
1998. The note bore interest at a rate equal to 6% over 12-month LIBOR and
required quarterly interest payments. During 1997, the Partnership paid $11,400
in interest on such note and made pre-payments of principal totaling, in
aggregate, $60,000. During 1998, the Partnership paid $3,275 in interest on such
note and repaid $40,000 in principal. At June 1, 1998, $20,000 in principal
remained unpaid. Pursuant to the terms of the promissory note, the interest rate
increased to 9% over 12-month LIBOR on the unpaid balance. At December 31, 1998,
$10,000 in principal and $352 in accrued interest remained unpaid. During 1999,
the Partnership paid the remaining principal and interest totaling $1,078.
For fiscal years 1999, 1998 and 1997, the General Partner and its
affiliates charged the Partnership for general partner's fees, legal services,
office space used by various members of the Partnership's management, and
interest on unpaid balances at an annual rate of 10%,
- --------
(1) The Estate of Oliver R. Grace beneficially owns 421,680 units
(including 39,950 units held in trusts of which the Estate of Oliver R. Grace is
the trustee). In addition, other members of the family beneficially own an
additional 218,665 units, which represents approximately 12.0% of the units
issued and outstanding. The Estate of Oliver R. Grace disclaims beneficial
ownership with respect to these additional units as well as the 39,950 units
held in certain trusts.
-17-
<PAGE> 19
compounded quarterly, as set forth in Table 6 below (see Item 11, "Executive
Compensation"). All of such charges have been included in selling, general and
administrative expenses.
TABLE 6: CHARGES BY GENERAL PARTNER AND ITS AFFILIATES
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
General Partner's fee $175,000 $150,000 $150,000
Legal services 9,999 15,000 12,000
Rent for office space 15,000 15,000 15,000
Interest on unpaid balances 158,923 125,709 96,767
</TABLE>
Except for the preceding items, there were no transactions between
Management (or the immediate families of Management) and the Registrant during
the fiscal year ended December 31, 1999 or thereafter. Further, there were no
other related party transactions and there existed no indebtedness to the
Registrant from Management (or any member of the immediate family of
Management).
-18-
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The documents filed as part of this report are listed in the Index to
Financial Statements and Supplemental Schedules set forth in Table 7, below.
TABLE 7: INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Document Page
- --------------------------------------------------------------------- --------
<S> <C>
The following financial information is contained within
Exhibit 1, "Audited Financial Statements:"
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1999 and 1998 F-2
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-3
Statements of Partners' Capital/(Deficit) for the
years ended December 31, 1999, 1998 and 1997 F-4
Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 F-5
Notes to Financial Statements F-6 -12
Report of Independent Accountants on Supplemental Schedules 36
Valuation and Qualifying Accounts 37
Real Estate and Accumulated Depreciation 38
</TABLE>
All other required supplemental financial schedules are either
contained within the notes to the financial statements or are not applicable.
REPORTS ON FORM 8-K
No current reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended December 31, 1999.
-19-
<PAGE> 21
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A complete listing of exhibits, including those incorporated by
reference, is shown on Table 8. All other exhibits or financial statement
schedules are not applicable.
TABLE 8: LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
- -------------- --------------------------------------------------------- ------
<S> <C> <C>
3.1 The Limited Partnership Agreement of Reeves Telecom *
Associates sets forth the rights of unit holders. It has
been previously filed as Exhibit B to Amendment No.2
to Registrant's Registration Statement on Form S-14
dated March 28, 1980 (Registration No.2-66452).
16.1 Letter from KPMG Peat Marwick, L.L.P., the former *
independent accountant of Registrant, regarding its
concurrence with the statements made by Registrant
concerning the resignation or dismissal as Registrant's
principal accountant. Such letter was filed as part of
Form 8-K filed on May 8, 1997.
27.1 Financial Data Schedule. **
99.1 The Robert C. Cantwell IV, MAI appraisals of the *
Boiling Spring Lakes property dated 12/21/88, 7/17/84,
and 2/23/82, which were filed as a part of Form 10-K for
September 30, 1988.
99.2 The Robert C. Cantwell IV, MAI appraisal of the *
Boiling Spring Lakes property dated September 10,
1993, which appraisal was filed as part of Form 10-K
for September 30, 1993.
99.3 The Robert C. Cantwell IV, MAI appraisal of the *
Boiling Spring Lakes property dated July 10, 1995,
which was filed as Exhibit 3 to the Form 10-K for
December 31, 1995.
99.4 The Robert C. Cantwell IV, MAI appraisal of the *
Boiling Spring Lakes property dated September 1, 1998,
which was filed as a paper exhibit to the Form 10-Q for
September 30, 1998 pursuant to a continuing hardship
exemption as provided in Rule 202 of Regulation S-T.
</TABLE>
* Incorporated herein by reference.
** Included in the Partnership's electronic filing on EDGAR.
-20-
<PAGE> 22
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.
REEVES TELECOM LIMITED PARTNERSHIP
Signatures Title Date
By: Grace Property
Management, Inc. General Partner March 24, 2000
By: /s/ JOHN S. GRACE
--------------------------
John S. Grace
President
-21-
<PAGE> 23
REEVES TELECOM
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
<PAGE> 24
REEVES TELECOM LIMITED PARTNERSHIP
INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Report of Independent Accountants 1
Financial Statements:
Balance Sheets as of December 31, 1999 and 1998 2
Statements of Operations for the years ended December 31, 1999, 1998 and 1997 3
Statements of Partners' Capital/(Deficit) for the years ended December 31, 1999,
1998 and 1997 4
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 5
Notes to Financial Statements 6 - 12
</TABLE>
<PAGE> 25
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners
Reeves Telecom Limited Partnership
In our opinion, the accompanying balance sheets and the related statements of
operations, partners' capital/(deficit), and cash flows present fairly, in all
material respects, the financial position of Reeves Telecom Limited Partnership
(the "Partnership") at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 12 to the
financial statements, the Partnership's recurring losses from operations and
liquidity position raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 12. The financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result
should the Partnership be unable to continue in existence.
/s/ PricewaterhouseCoopers LLP
January 13, 2000
Raleigh, North Carolina
<PAGE> 26
REEVES TELECOM LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Assets
Current assets:
Cash $ 129,954 $ 69,864
Prepaid and other current assets 4,907 12,168
----------- -----------
Total current assets 134,861 82,032
Properties held for sale and related buildings and equipment, net 960,480 1,025,256
----------- -----------
Total assets $ 1,095,341 $ 1,107,288
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 102,210 $ 80,075
Accrued expenses, affiliates 1,772,994 1,414,072
Current maturities of long-term debt 140,264 139,055
----------- -----------
Total current liabilities 2,015,468 1,633,202
Long-term debt, less current maturities 1,432 18,570
Commitments and contingencies (see Notes 7 and 9)
Partners' deficit - issued and outstanding 1,828,148 units
at December 31, 1999 and 1998 (921,559) (544,484)
----------- -----------
Total liabilities and partners' deficit $ 1,095,341 $ 1,107,288
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 27
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Revenues:
Property sales $ 555,441 $ 435,046 $ 411,609
Country club revenue 355,506 437,436 373,972
Interest income and finance charges 2,501 1,732 3,303
----------- ----------- -----------
913,448 874,214 788,884
----------- ----------- -----------
Expenses:
Direct costs of property sold 163,114 148,013 113,611
Direct costs of country club revenue 34,366 51,802 --
Selling, general and administrative expenses
of country club 371,292 420,417 339,766
Selling, general and administrative expenses 494,740 390,604 391,067
Depreciation 66,114 63,659 61,565
Interest 162,163 135,634 112,526
----------- ----------- -----------
1,291,789 1,210,129 1,018,535
----------- ----------- -----------
Operating loss (378,341) (335,915) (229,651)
Other income:
Timber sales 1,266 -- 694
----------- ----------- -----------
Net loss $ (377,075) $ (335,915) $ (228,957)
=========== =========== ===========
Loss per partnership unit $ (.21) $ (.18) $ (.13)
=========== =========== ===========
Weighted average partnership units outstanding 1,828,148 1,828,245 1,828,248
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 28
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL/(DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Partners' capital/(deficit) at beginning of year $(544,484) $(208,569) $ 20,388
Net loss (377,075) (335,915) (228,957)
--------- --------- ---------
Partners' (deficit) at end of year $(921,559) $(544,484) $(208,569)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 29
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(377,075) $(335,915) $(228,957)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 66,114 63,659 61,565
Gain on sale of residential property (13,364) -- --
Provision for loss on property held for sale 14,961 -- --
Change in assets and liabilities:
Prepaid and other assets 7,261 (12,168) --
Property held for sale, net 16,041 21,495 80,579
Accounts payable and accrued expenses 22,135 14,949 (7,935)
--------- --------- ---------
Net cash used in operating activities (263,927) (247,980) (94,748)
--------- --------- ---------
Cash flows from investing activities:
Purchase of land improvements and equipment (18,976) (199,213) (15,663)
--------- --------- ---------
Cash flows from financing activities:
Repayment of long-term debt (23,929) (50,833) (71,165)
Borrowings under non-revolving credit facility 120,000 229,273 515
Repayments of non-revolving credit facility (112,000) (117,273) (83,165)
Increase in accrued expenses, affiliates 358,922 307,759 278,438
--------- --------- ---------
Net cash provided by financing activities 342,993 368,926 124,623
--------- --------- ---------
Net increase (decrease) in cash 60,090 (78,267) 14,212
Cash at beginning of year 69,864 148,131 133,919
--------- --------- ---------
Cash at end of year $ 129,954 $ 69,864 $ 148,131
========= ========= =========
Supplemental information:
Interest paid $ 3,240 $ 9,062 $ 17,009
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 30
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. PLAN OF LIQUIDATION
On May 17, 1979 the stockholders of Reeves Telecom Corporation (the
"Corporation") approved a plan of liquidation (the "Plan") for the
Corporation and its subsidiaries. The plan, which was determined by the
Internal Revenue Service to qualify as a Section 337 liquidation,
authorized the Corporation's Board of Directors to sell the
Corporation's assets and distribute any remaining unsold assets to its
stockholders and/or a liquidation trust. On May 8, 1980, stockholders
at a special meeting approved an amendment to the Plan whereby assets
not sold within one year of the date the Plan was approved could, at
the discretion of the Board of Directors, be transferred from the
Corporation to a South Carolina limited partnership which would
undertake to sell the remaining assets on behalf of the stockholders.
On May 15, 1980, the Corporation was liquidated and all of its unsold
assets and liabilities were transferred to Reeves Telecom Associates, a
South Carolina limited partnership (the "Partnership"). Stockholders of
the Corporation received one Partnership unit in exchange for each
share of common stock. The units are registered under the Securities
Act of 1933 but are not listed on any national securities exchange. In
January 1987, pursuant to a change in South Carolina law, the
Partnership's legal name was changed from Reeves Telecom Associates to
Reeves Telecom Limited Partnership.
Pursuant to the Plan, the Corporation sold all of its broadcasting
assets and substantially all of the land held for development and sale
at one of its two land development locations and distributed cash to
its stockholders of $.90 per share on February 29, 1980 and $2.30 per
share on May 15, 1980.
Remaining assets relate primarily to land held for sale and cash,
generated primarily from the sale of timber, real estate and operation
of a golf club (Note 3).
The Partnership's Managing General Partner is Grace Property
Management, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the
accrual basis of accounting. The Partnership's assets have been written
down, from time to time, to reflect their fair values based upon
appraisals.
PROPERTY SALES
Property sales represent individual building lots sold for cash and the
gross sales price of residential houses built or acquired by the
Partnership for resale. Land cost included in direct costs of property
sold represents the proportionate amount of the total project costs,
after recorded valuation allowances, based on the sales value of the
lot to the total estimated project sales value.
PROPERTY HELD FOR SALE AND RELATED BUILDINGS AND EQUIPMENT
Related buildings and equipment are stated at cost less accumulated
depreciation. Depreciation for financial reporting purposes is
calculated on the straight-line basis over the estimated useful lives
of 8 to 31.5 years for buildings and 5 to 20 years for equipment and
land improvements.
6
<PAGE> 31
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Partnership assesses the realizability of the carrying value of its
land held for sale and related buildings and equipment whenever events
or changes in circumstance indicate that an impairment may have
occurred in accordance with the provisions of Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount 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.
ADVERTISING COSTS
Advertising costs of $29,830, $30,042 and $27,360 were expensed as
incurred during the years ended December 31, 1999, 1998 and 1997,
respectively.
RECLASSIFICATIONS
Certain amounts in the 1998 financial statements have been reclassified
to conform with the 1999 presentation. The reclassifications had no
effect on previously reported net loss.
3. PROPERTY HELD FOR SALE AND RELATED BUILDING AND EQUIPMENT
During September 1998, the Partnership obtained an appraisal of the
Boiling Spring Lakes property. Based upon the appraisal, the valuation
allowance established in previous years was considered adequate.
Management believes that based upon the 1999 sales activities and the
golf course operations, the valuation allowance continues to be
adequate.
A summary of property held for sale and related buildings and equipment
at December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Boiling Spring Lakes:
Land held for sale $ 2,171,725 $ 2,215,178
Other land and land improvements 412,799 404,373
Buildings 297,087 297,087
Equipment 333,832 323,303
Residential house held for sale 144,961 117,455
----------- -----------
3,360,404 3,357,396
Pimlico Plantation lots 500 500
Less:
Accumulated depreciation (529,372) (461,108)
Valuation allowance (1,871,052) (1,871,532)
----------- -----------
$ 960,480 $ 1,025,256
=========== ===========
</TABLE>
7
<PAGE> 32
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. ACCRUED EXPENSES, AFFILIATES
A summary of accrued expenses, affiliates at December 31, 1999 and 1998
is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
General partner fees $ 931,000 $ 756,000
Legal fees 128,727 118,728
Rent 93,904 78,904
Interest 582,695 423,772
Brokerage commission 30,000 30,000
Fees to a former general partner 6,668 6,668
---------- ----------
$1,772,994 $1,414,072
========== ==========
</TABLE>
General Partner's fees represent amounts owed to the General Partner.
Legal fees, rent and brokerage commission represent amounts owed to
certain affiliates of the General Partner. From time to time the
General Partner and its affiliates charge the Partnership interest on
amounts owed to them by the Partnership, which interest is accrued by
the Partnership as being owed to such entities. See Note 6 for
additional information regarding related party transactions.
5. LONG-TERM DEBT
Long-term debt at December 31, 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Borrowings outstanding under a non-revolving credit facility, as
defined below $120,000 $112,000
8.57% note payable in monthly installments of $1,370, including
interest, maturing in February 2001, collateralized by equipment
with a net book value of $14,379 and $27,161 at December 31,
1999 and 1998, respectively 21,696 35,625
Uncollateralized note payable, repaid in 1999 -- 10,000
-------- --------
141,696 157,625
Less current maturities 140,264 139,055
-------- --------
$ 1,432 $ 18,570
======== ========
</TABLE>
Periodically, the Partnership enters into non-revolving credit
facilities requiring interest only payments at the lender prime rate
plus .5% (8.5% and 8.25% at December 31, 1999 and 1998, respectively).
These agreements are collateralized by building lots in Boiling Springs
Lakes.
8
<PAGE> 33
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Principal maturities of long-term debt for the years subsequent to
December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 140,264
2001 1,432
---------
$ 141,696
---------
</TABLE>
6. RELATED PARTY TRANSACTIONS
The General Partners charged the Partnership for services and office
space for the years ended December 31, 1999, 1998 and 1997 as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
General Partner fees $175,000 $150,000 $150,000
Legal fees 9,999 17,000 10,000
Office space 15,000 15,000 15,000
Interest at 10% 158,923 125,759 96,769
-------- -------- --------
$358,922 $307,759 $271,769
======== ======== ========
</TABLE>
7. LITIGATION
In the past, litigation has been filed against the Partnership claiming
breach of contract because lots guaranteed in the sales contract as
being "high, dry and suitable for building" will not pass current
county health department requirements regarding the installation of
septic tanks and on-site sewage disposal systems. Management contends
this language does not constitute a guarantee of soil conditions for
sewer purposes and that even if it did, installation and use of septic
tanks on these lots would have been permitted under county regulations
in effect prior to August 1976 and that it had no way of knowing that
stricter regulations would later be enacted. In the event litigation is
filed which results in an unfavorable ruling, possible remedies could
include: refunding the purchase price of the lots; building
nitrification fields with fill dirt that would allow installation of
sewage disposal systems on the lots; providing the litigants with lots
that will pass current county health department requirements; and
paying monetary damages. If mandated, the cost of such remedial action
in the aggregate could be substantial. No provision for this contingent
liability has been made in the accompanying financial statements;
however, at December 31, 1999 no suits or claims are pending against
the Partnership related to this matter.
8. INCOME TAXES
Results of operations of the Partnership are taxable to the partners
and no recognition of Federal and state income tax is included in the
financial statements.
9
<PAGE> 34
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. LEASES
The Company leases certain office and golf course equipment under
operating leases. The minimum lease payments under operating leases for
the years subsequent to December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 19,820
2001 9,720
2002 4,860
----------
$ 34,400
----------
</TABLE>
Equipment rental and lease expense for the years ending December 31,
1999, 1998 and 1997 was $36,685, $35,854 and $31,984, respectively.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments". The estimated fair value amounts have been
determined by the Partnership using the methods and assumptions
described below. However, considerable judgment is required to
interpret market data to develop estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts the Partnership could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical
to estimate that value:
LONG-TERM DEBT
The fair value of long-term debt has been estimated by discounting the
future cash flows using the current rates offered for debt issues with
similar characteristics. The carrying amount of long-term debt
approximates fair value at December 31, 1999 and 1998.
11. BUSINESS SEGMENT DATA
The following disclosure is made in accordance with the requirements of
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This Statement
requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of
the enterprise and in condensed financial statements of interim
periods. It also requires disclosure of certain information about the
Company's products and services, the geographic areas in which the
Company operates and its major customers. The adoption of this
pronouncement has resulted in a revision of the Company's operating
segments footnote disclosures, but did not have an impact on the
financial statements.
10
<PAGE> 35
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Partnership operates two business segments: property sales and a
country club. Revenues and direct cost are separately stated in the
financial statements. All revenues during the years ended December 31,
1999, 1998 and 1997 for both segments have been generated in the state
of North Carolina. Operating loss, net loss, depreciation, identifiable
assets and capital expenditures by business segment are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Operating loss:
Property sales $ (185,388) $ (173,784) $ (150,944)
Country Club (192,953) (162,131) (78,707)
----------- ----------- -----------
Total $ (378,341) $ (335,915) $ (229,651)
=========== =========== ===========
Net loss:
Property sales $ (184,122) $ (173,784) $ (150,250)
Country Club (192,953) (162,131) (78,707)
----------- ----------- -----------
Total $ (377,075) $ (335,915) $ (228,957)
=========== =========== ===========
Depreciation:
Property sales $ 3,144 $ 3,262 $ 3,262
Country Club 62,970 60,397 58,303
----------- ----------- -----------
Total $ 66,114 $ 63,659 $ 61,565
=========== =========== ===========
Identifiable assets:
Property sales $ 577,174 $ 533,518 $ 491,818
Country Club 518,167 573,770 567,510
----------- ----------- -----------
Total $ 1,095,341 $ 1,107,288 $ 1,059,328
=========== =========== ===========
Capital expenditures:
Property sales $ 3,486 $ 73,557 $ --
Country Club 15,490 125,656 15,663
----------- ----------- -----------
Total $ 18,976 $ 199,213 $ 15,663
=========== =========== ===========
</TABLE>
11
<PAGE> 36
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. LIQUIDITY AND GOING CONCERN ISSUES
Cash generated from Fox Squirrel Country Club and individual lot sales
may not be sufficient to meet future operating costs, debt service and
other cash requirements. Operating cash flows have been negative in
each of the years ended December 31, 1999, 1998 and 1997. Further, at
December 31, 1999, the current liabilities of the Partnership exceeded
its current assets by $1,880,607. The partners' deficit at December 31,
1999 is $921,559. No reasonable offer has been received for the assets
of the Partnership due principally to the fact that the majority of the
land is wetland and that most of the unsold plotted lots do not satisfy
current county health standards regarding the installation of septic
tanks and on-site sewage disposal systems. If the Partnership's cash
flow is less than the management's expectations, capital programs
presently planned may be either postponed, scaled back, or eliminated,
and certain operating expenditures may be either deferred or, in the
case of payments to affiliates of the General Partner, accrued. Despite
such contingency plans by management, the above mentioned factors
indicate that the Partnership may be unable to continue in existence
while attempting to complete the sale and liquidation of the
Partnership's remaining assets. The financial statements have been
prepared assuming the Partnership will continue as a going concern. The
Partnership's recurring losses from operations and liquidity position
raise substantial doubt about the entity's ability to continue while
attempting to sell the remaining assets of the Partnership.
The financial statements do not include any adjustments relating to the
recoverability and classification of reported assets amounts or the
amounts and classification of liabilities that might result should the
Partnership be unable to continue in existence.
12
<PAGE> 37
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Partners
Reeves Telecom Limited Partnership
Our audits of the financial statements referred to in our report dated January
13, 2000, and appearing on page F-1 of this Form 10-K, also included an audit of
the financial statement schedules listed in Item 14(a)(2) of this Form 10-K. In
our opinion, these financial statement schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related financial statements.
/s/ PricewaterhouseCoopers LLP
January 13, 2000
Raleigh, North Carolina
<PAGE> 38
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Changes Balance at
Beginning Costs and Add End of
Description of Period Expenses Deductions (Deduct) Period
- ---------------------------- ----------- --------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
For year ended Dec. 31, 1999
RE valuation allowance $1,871,534 $14,961 $ 15,442 $ -0- $1,871,053
For year ended Dec. 31, 1998
RE valuation allowance 1,886,624 -0- 15,090 -0- 1,871,534
For year ended Dec. 31, 1997
RE valuation allowance 1,902,644 -0- 16,020 -0- 1,886,624
</TABLE>
NOTES:
1. Additions to the real estate valuation allowance charged to costs and
expenses reduce the reported book value of certain real estate held for
sale to approximate market.
2. Deductions to the real estate valuation allowance reflect the sale of real
estate to which the valuation allowance applies.
-37-
<PAGE> 39
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Life Upon
Which
Cost Gross Depreciation
Capitalized Amount Accum- in Latest
Initial Cost Subsequent Carried ulated Income
Encum- to to at End Deprec- Net Date of Statement is
Description brances Partnership Acquisition of Period iation Book Value Acquisition Computed
- -------------------------- -------- ----------- ----------- ---------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boiling Spring Lakes, NC:
Building lots and land $ -0- $2,137,361 $ 77,817 $2,171,725 $ -0- $2,171,725 May 1980 N/A
Improved lot held for
resale 120,000 130,047 14,914 144,961 -0- 144,961 April 1999 N/A
------- ---------- ---------- --------- ------- ----------
Subtotal 120,000 2,267,408 92,731 2,316,686 -0- 2,316,686 N/A
Pimlico Plantation, SC:
Building lots and land -0- 500 -0- 500 -0- 500 May 1980 N/A
-------- ---------- ---------- ---------- ------- ----------
Beginning of period
Total at December 31, 1999 $120,000 $2,267,908 $ 92,731 $2,317,186 $ -0- $2,317,186
======== ========== ========== ========== ======= ==========
</TABLE>
NOTES:
1. All building lots and land held for sale are unimproved.
2. The amounts shown for Boiling Spring Lakes does not reflect valuation
allowance of $1,871,053 at December 31, 1999. See Schedule II, "Valuation
and Qualifying Accounts." The valuation allowance, established in previous
years to reduce the carrying value of the Partnership's land in Boiling
Spring Lakes to approximate market value, is reviewed from time to time to
determine its adequacy and is reduced as land is sold.
-38-
<PAGE> 40
SCHEDULE III, CONTINUED
RECONCILIATION OF GROSS AND NET BOOK VALUE, AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Gross Accumulated Net
Book Value Depreciation Book Value
---------- ------------ ----------
<S> <C> <C> <C>
Year Ended December 31, 1999
Balance at beginning of period $2,215,678 $-0- $2,215,678
Additions during period:
Acquisitions 130,047 -0- 130,047
Improvements 14,914 -0- 14,914
Deductions during period:
Cost of real estate sold 43,454 -0- 43,454
---------- ---- ----------
Balance at end of period $2,317,186 $-0- $2,317,186
========== ==== ==========
Year Ended December 31, 1998
Balance at beginning of period $2,174,545 $-0- $2,174,545
Additions during period:
Acquisitions -0- -0- -0-
Improvements 77,817 -0- 77,817
Deductions during period:
Cost of real estate sold 36,584 -0- 36,584
---------- ---- ----------
Balance at end of period $2,215,678 $-0- $2,215,678
========== ==== ==========
</TABLE>
-39-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 129,954
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 134,861
<PP&E> 960,480
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,095,341
<CURRENT-LIABILITIES> 2,015,468
<BONDS> 1,432
0
0
<COMMON> (921,559)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,095,341
<SALES> 555,441
<TOTAL-REVENUES> 913,448
<CGS> 163,114
<TOTAL-COSTS> 1,129,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162,163
<INCOME-PRETAX> (377,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (377,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (377,075)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
