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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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
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TO
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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
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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 23, 2001, THE REGISTRANT HAD OUTSTANDING 1,812,062 PARTNERSHIP UNITS.
SEE ITEM 5. THERE IS NO ACTIVE MARKET FOR THE PARTNERSHIP UNITS. AS OF MARCH 23,
2001, NON-AFFILIATES HELD 1,171,717 PARTNERSHIP UNITS.
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TABLE OF CONTENTS
Page
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PART I.................................................................................. 2
Item 1. Business..................................................................... 2
Item 2. Properties................................................................... 8
Item 3. Legal Proceedings............................................................ 10
Item 4. Submission of Matters to a Vote of Unit Holders.............................. 10
PART II................................................................................. 11
Item 5. Market for Registrant's Partnership Units and Related Security Matters....... 11
Item 6. Selected Financial Data...................................................... 11
Item 7. Management Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.................. 16
Item 8. Financial Statements and Supplementary Data.................................. 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 16
PART III................................................................................ 17
Item 10. Directors and Executive Officers of Registrant.............................. 17
Item 11. Executive Compensation...................................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 17
Item 13. Certain Relationships and Related Transactions.............................. 18
PART IV................................................................................. 20
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K........... 20
SIGNATURES.............................................................................. 23
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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 Partnership 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 Partnership. The Partnership 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, the Partnership'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.
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NARRATIVE DESCRIPTION OF BUSINESS
The principal asset of the Partnership is real estate for development
located in the City of Boiling Spring Lakes, in Brunswick County, North
Carolina, where, until March 9, 2001, the Partnership also owned and operated 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 which was sold in March 2001.
BOILING SPRING LAKES
- - REAL ESTATE SALES
The Partnership sold approximately 5,127 acres of land to The Nature
Conservancy in two transactions during fiscal 2000. The first transaction
involved the sale of certain large tracts of undeveloped land, mostly wetlands
and woodlands, for an aggregate of $1,625,850 and closed in July 2000. The
second transaction involved the sale of certain individual undeveloped lots,
small tracts and certain land suitable for commercial development for an
aggregate of $774,150 and closed in September 2000. The Partnership realized a
profit of approximately $2,081,000 from the two transactions. Reference is made
to the more detailed information on both transactions set forth on Form 8-K
filed with the U.S. Securities and Exchange Commission on June 29, 2000.
Other than from the two transactions with The Nature Conservancy, revenue
for each of the last five fiscal years ended December 31 is shown on Table 1,
below.
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TABLE 1: REVENUE FROM REAL ESTATE SALES
No. of Individual Lots Sold Other Total
Improved Unimproved Parcels Revenues
-------- ---------- ------- ---------
Fiscal 2000 0 56 1 $435,169
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
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 the construction of a house has been started and, in
some cases, completed. The term "unimproved" refers to an individual lot on
which construction of a house has not yet been started. The term "other parcels"
refers to unplatted parcels, large tracts and commercial lots described below
During 2000, the Partnership sold one unplatted one-acre parcel for
$25,000. 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.
- - FOX SQUIRREL COUNTRY CLUB
Fox Squirrel Country Club ("Fox Squirrel") is a semi-private golf course
and country club. Its 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 the Partnership to generate more lot sales, at a higher
sales price per lot, than would be the case in the absence of such a facility.
On March 9, 2001, the Partnership sold the assets of Fox Squirrel to
WW-Golf & Services, LLC, a South Carolina limited liability company, for
consideration totaling $862,500, comprised of $150,000 in cash and a note
receivable (the "Promissory Note"). The Promissory Note has an initial principal
amount of $712,500, bears interest at an annual rate of 9.5%, and matures on
March 9, 2004. The borrower is obligated to make payments of principal and
interest as follows: (i) monthly payments of $6,641 per month commencing April
9, 2001 up to and including February 9, 2004, and (ii) a final payment of
$677,642 on March 9, 2004. The Partnership has a security interest in all of the
assets sold until the Promissory Note has been
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paid in full. The borrower may extend the maturity of the note if the
Partnership has not completed remediation of certain environmental contamination
from an underground storage tank formerly located on the golf club grounds.
Remediation work has been completed as of December 31, 2000 and the Partnership
is waiting for a closure letter from the State of North Carolina.
The Partnership's revenue and operating loss from Fox Squirrel for the last
five fiscal years are shown on Table 2, below.
TABLE 2: REVENUE AND OPERATING LOSS
FROM FOX SQUIRREL COUNTRY CLUB
Operating
Revenue Loss
------- ----
Fiscal 2000 $ 332,462 $(214,975)
Fiscal 1999 355,506 (192,953)
Fiscal 1998 437,436 (162,131)
Fiscal 1997 373,972 (78,707)
Fiscal 1996 358,580 (144,220)
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 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 five years due principally to the harvesting of seasoned timber
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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
Revenue
-------
Fiscal 2000 $ -0-
Fiscal 1999 1,266
Fiscal 1998 -0-
Fiscal 1997 694
Fiscal 1996 12,866
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 meet present
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 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
As of December 31, 2000, the Partnership 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
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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
For the year ended December 31, 2000, $2,400,000 in revenue from property
sales was attributable from one buyer. Profit on these sales amounted to
$2,080,670 in the year. Generally, however, 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 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, 2000, the Partnership held $223,983 in cash. Accounts
payable and accrued expenses as of this date totaled $222,620.
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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. At the
beginning of Fiscal 1996, reserves totaling $250,000 had been established. 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. During Fiscal 2000, reserves of
$175,000 were established to fund certain capital improvements within the
development.
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 commenced by the
Corporation in 1962. Part of the tract is now within the City of Boiling Spring
Lakes, which has approximately 2,270 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.
As of December 31, 2000, the Partnership owns the following real estate:
(1) approximately 475 acres of undeveloped land, (2) 1,295 plotted lots, both
recorded and unrecorded, (3) approximately 150 acres designated for commercial
use, (4) 162.9 acres comprising a surveyed 18-hole sprinklered golf course,
club house and maintenance building, together known as Fox Squirrel, under
contract for sale that closed on March 9, 2001; (5) a single family residence
comprising 1,648 sq. ft. that is rented out by the Partnership, (6) a building
comprising approximately 500 sq. ft. that is leased to the City of Boiling
Spring Lakes at a rate of $1 per year for use as a post office, and (7) a sales
office comprising approximately 1,269 sq. ft.
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, 1998 and 2001, 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.
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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.
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 resulted in a
profit to the Partnership of approximately $19,400, which is 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, and the second was sold for $128,000 and
generated a profit of approximately $17,100. In Fiscal 1998, the Partnership
sold one improved lot for $117,300, generating a profit of approximately
$13,700. During Fiscal 1999, the Partnership sold one improved lot for
approximately $130,800, generating a profit of approximately $11,200. Management
may undertake similar projects during Fiscal 2001.
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.
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. As of December 31, 2000, the
Partnership 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.
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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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of unit holders during Fiscal 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY MATTERS
As of December 31, 2000 there were 1,863 recorded holders of partnership
units, including 532 registered holders of an aggregate of 67,754 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, 1999. 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) undertaking certain infrastructure and
other improvements in the development, (ii) undertaking on a limited scale home
construction on lots owned by the Partnership to demonstrate the viability of
larger scale building programs, and (iii) keeping accrued expenses as low as
possible. Management believes that this plan will, in future years, result in,
among other things, an increase in the number of lots sold and a higher average
sales price per lot. 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 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, 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.
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
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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
Year Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenues:
Property sales $ 2,835,169 $ 555,441 $ 435,046 $ 411,609 $ 463,051
Other revenue 10,887 1,250 866 1,651 1,878
----------- ----------- ----------- ----------- -----------
Total revenue 2,846,056 556,691 435,912 413,260 464,929
Expenses:
Direct cost of property sold 367,259 163,114 148,013 113,611 40,201
SG&A 511,864 494,740 390,604 391,067 432,767
Depreciation 2,681 3,144 3,262 3,262 9,132
Interest 72,929 81,081 67,817 56,263 112,600
----------- ----------- ----------- ----------- -----------
Total expenses 954,733 742,079 609,696 564,203 594,700
----------- ----------- ----------- ----------- -----------
Operating income (loss) 1,891,323 (185,388) (173,784) (150,943) (129,771)
Other income, net 3,400 1,266 -0- 694 13,547
----------- ----------- ----------- ----------- -----------
Net income (loss) from cont. ops. $ 1,894,723 $ (184,122) $ (173,784) $ (150,249) $ (116,224)
Loss from discontinued operations (214,975) (192,953) (162,131) (78,709) (144,220)
----------- ------------ ----------- ----------- -----------
Net income (loss) $ 1,679,748 $ (377,075) $ (335,915) $ (228,958) $ (260,444)
=========== ============ =========== =========== ===========
Per Unit Data
- ------------------------------
Income (loss) from cont. ops. $1.04 $(0.10) $(0.10) $(0.08) $(0.06)
Net income (loss) $0.92 $(0.21) $(0.18) $(0.13) $(0.14)
Some amounts in Table 4 for prior years are reclassified to conform to the
presentation in the current year. Such reclassifications have not resulted in a
change in net loss.
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TABLE 5: SELECTED BALANCE SHEET DATA
At December 31,
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Cash, prepaid expenses and other current
assets $ 242,772 $ 134,861 $ 82,032 $ 148,131 $ 133,919
Properties held for sale and related
property and equipment, net 855,491 960,480 1,025,256 911,197 1,037,678
Total assets 1,098,263 1,095,341 1,107,288 1,059,328 1,171,597
Accounts payable and accrued
expenses 222,620 1,875,204 1,633,202 1,235,189 997,568
Long-term debt 117,454 141,696 18,570 32,708 153,641
Total liabilities 340,074 2,016,900 1,651,772 1,267,897 1,151,209
Partners' capital (deficit) 758,189 (921,559) (544,484) (208,569) 20,388
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 to the
presentation in the current year.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
For the years ended December 31, 2000 and 1999, revenue from the sale of
real estate was $2,835,169 and $555,441, respectively. Management attributes the
increase principally to the sale of land to The Nature Conservancy in two
separate transactions during 2000 as described in Item 1. Other than from such
transactions, revenue from the sale of real estate in Fiscal 2000 was $435,169.
Management attributes the 22% decrease in revenue principally to a lower number
of unimproved residential lots sold in 2000 than in 1999, 56 as compared to 68,
and to the sale during 1999 of one improved lot and seven nonresidential
tracts, whereas only one nonresidential tract was sold in 2000. The decrease in
the number of lots sold, in turn, is primarily attributable to a somewhat weaker
regional real estate market during 2000 than in 1999.
Revenue from Fox Squirrel for Fiscal 2000 and 1999 was $332,462 and
$355,506, respectively. Management attributes the 6% decrease principally to
generally more favorable weather in the Northeast during the first half of 2000
than in last year, which meant fewer golfers traveling from the Northeast to the
Wilmington, NC - Myrtle Beach, SC corridor than last year. An increase in greens
fees per non-member round partially offset the decline in non-member rounds
played.
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Selling, general and administrative expenses for 2000 were $511,864,
compared to $494,740 in 1999. Management attributes the increase principally to
higher legal, accounting and auditing fees, and consulting fees relating to
environmental matters. Direct cost of property sold in 2000 was $367,259,
compared to $163,114 in 1999. Management attributes the increase principally to
the sale of land to The Nature Conservancy during 2000. Depreciation was $2,681
in 2000, compared to $3,144 in 1999. Management attributes the decrease
principally to more assets being fully depreciated in 2000 than in the prior
year. Interest expense was $72,929 in 2000, compared to $81,081 in 1999.
Management attributes the decrease in interest expense primarily to a lower
average outstanding balance of indebtedness during 2000 to the General Partner
and its affiliates. The General Partner and its affiliates charge the
Partnership interest on accrued but unpaid expenses.
For Fox Squirrel, selling, general and administrative expenses were
$392,106 for 2000, compared to $371,292 for 1999. Management attributes the
increase principally to higher property taxes and employee compensation compared
to 1999. Direct cost of Country Club revenue in 2000 was $37,759, compared to
$34,366 in 1999. Management attributes the increase principally to higher costs
associated with the dining service in 2000 than in 1999. Depreciation for 2000
was $55,528 compared to $62,970 for 1999. Management attributes the decrease
principally to lower capital expenditures made in 2000 than in 1999. Interest
expense for 2000 was $72,929, compared to $81,081 for 1999. Management
attributes the decrease in interest expense primarily to a lower average
outstanding balance of indebtedness during 2000 to the General Partner and its
affiliates. The General Partner and its affiliates charge the Partnership
interest on accrued but unpaid expenses.
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.
Selling, general and administrative expenses for 1999 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. 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. Depreciation for 1999 was $3,144, a
decrease of less than 4% over 1998, which decrease Management attributes
principally to lower capital expenditures made during 1999 than in 1998.
Interest expense for 1999 was $81,081, compared to $67,817 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.
For Fox Squirrel, revenue for Fiscal 1999 and 1998 was $355,506 and
$437,436, respectively. Management attributes the 19% decrease principally to
unusually inclement
-14-
16
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.
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 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 $62,970, compared to
$60,937 in 1998. Management attributes the 3% increase principally to capital
expenditures made during 1998.
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, until the sale of Fox Squirrel in March 2001, 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. Cash is generated primarily from individual lot sales
and may not be sufficient to meet operating costs, debt service and other cash
requirements. 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 not had more than one construction loan outstanding, with a
maximum balance, including accrued interest, not exceeding $110,000, and has
generally succeeded in selling the house and lot on which it stands prior to the
completion of construction. In 2001 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
-15-
17
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 2000, the Partnership generated $1,859,914 of cash in operating
activities, compared to cash used of $263,927 during 1999. The difference is
primarily due to the sale of land to The Nature Conservancy for an aggregate of
$2,400,000 during 2000.
Cash used in investing activities was $68,365 in 2000, compared to $18,976
in 1999. Management attributes the increase principally to expenditures made in
2000 relating to the repair of a dam washed out during 2000.
Cash used in financing activities in 2000 was $1,697,520, compared to cash
provided of $342,993 in 1999. The change is attributable to the payment of
accrued expenses owed to the General Partner and its affiliates during 2000.
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.
-16-
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF GENERAL PARTNER
Period of Service as
Name Age General Partner Commenced
- ------------------------------- ------------ -------------------------
Grace Property Management, Inc. N/A May 15, 1980
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
Name Capacity General Partner's Fee
- ------------------------------- --------------- ---------------------
Grace Property Management, Inc. General Partner $ 161,250
Prior to 2000, except for $25,000 paid in April 1990, the Partnership had
not paid the General Partner its general partner's fee since January 1986,
although they have been provided for in the Partnership's financial statements.
During Fiscal 2000, the Partnership paid to the General Partner $1,018,500,
representing unpaid general partner's fees through June 30, 2000. As of December
31, 2000, general partner's fees accrued but not paid to Grace Property
Management totaled $73,750. The Partnership has no ongoing 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, 2000, the Partnership had a group life insurance plan in place
covering all full-time employees of the Partnership located in Boiling Spring
Lakes. The Partnership has no pension or profit sharing plan but does provide
for incentive bonus compensation to certain managerial employees for meeting or
exceeding predesignated budget targets. The Partnership has no options,
warrants, or appreciation rights outstanding. No Management person is indebted
to the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2000, the Partnership has 1,828,148 partnership units
issued and outstanding. Information with respect to the principal holders of
record known to the
-17-
19
Partnership to beneficially own more than five (5%) percent of the outstanding
voting securities is set forth below.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class
- ------------------------- ---------------------------------- ------------
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)
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 prepayments 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 2000, 1999 and 1998, 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%, 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.
- ----------
(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.
-18-
20
TABLE 6: CHARGES BY GENERAL PARTNER AND ITS AFFILIATES
2000 1999 1998
General Partner's fee $161,250 $175,000 $150,000
Legal services 13,500 9,999 15,000
Rent for office space 15,000 15,000 15,000
Consulting fees 240,000 -0- -0-
Interest on unpaid balances 141,245 158,923 125,709
Amounts paid by the Partnership to the General Partner and its affiliates
during 2000 reflect amounts previously accrued and unpaid, and are $135,228 for
legal fees, $101,404 for rent, $30,000 for commissions, $1,018,500 for general
partner's fees, and $722,678 for interest. In addition, an affiliate of the
General Partner was paid $240,000 for consulting fees in connection with the
sale of land to The Nature Conservancy, which amount was included in direct
costs of property sold.
In connection with the sale of the assets of Fox Squirrel in March 2001, an
affiliate of the General Partner will be paid consulting fees of not more than
$7,500 plus not more than 5% of the principal payments made in respect of the
promissory note issued by WW-Golf & Services, LLC to the Partnership, as and
when such principal is collected by the Partnership.
Except for the preceding items, there were no transactions between
Management (or the immediate families of Management) and the Partnership during
the fiscal year ended December 31, 2000 or thereafter. Further, there were no
other related party transactions and there existed no indebtedness to the
Partnership from Management (or any member of the immediate family of
Management).
-19-
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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
Document Page
-------- ----
The following financial information is contained within Exhibit 1, "Audited
Financial Statements":
Report of Independent Accountants F-1
Balance Sheets as of December 31, 2000 and 1999 F-2
Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 F-3
Statements of Partners' Capital/(Deficit) for the
years ended December 31, 2000, 1999 and 1998 F-4
Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 F-5
Notes to Financial Statements F-6-13
Report of Independent Accountants on Supplemental Schedules 37
Valuation and Qualifying Accounts 38
Real Estate and Accumulated Depreciation 39
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, 2000.
-20-
22
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
Exhibit No. Description of Exhibit Page
- --------------- ----------------------------------------------------------- -----------
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 the Partnership's Registration Statement on Form S-
14 dated March 28, 1980 (Registration No.2-66452).
10.1 Purchase Agreement I between the Partnership, as *
seller, and The Nature Conservancy, as purchaser, dated
May 1, 2000 relating to the sale of tracts of wetlands
and woodlands. Such agreement was filed as part of
Form 8-K filed on June 21, 2000.
10.2 Purchase Agreement II between the Partnership, as *
seller, and The Nature Conservancy, as purchaser, dated
May 1, 2000 relating to the sale of certain individual
lots and certain land suitable for commercial
development. Such agreement was filed as part of Form
8-K filed on June 21, 2000.
10.3 Purchase and Sale Agreement between the Partnership, *
as seller, and WW-Golf & Services, LLC, as purchaser,
dated October 18, 2000 relating to the sale of the assets
of Fox Squirrel Country Club, with exhibits. Such
agreement was filed as Exhibit 10.1 to Form 10-Q filed
on November 14, 2000.
10.4 Amendments No. 1 through 7 to the Purchase and Sale 43
Agreement relating to the sale of the assets of Fox
Squirrel Country Club.
10.5 Loan Agreement between the Partnership, as lender, and 57
WW-Golf & Services, LLC, as borrower, dated March 9, 2001.
10.6 Promissory Note dated March 9, 2001, issued by WW 92
Golf & Servcies, LLC to the Partnership in connection
with the sale of the assets of Fox Squirrel Country Club.
-21-
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TABLE 8: LIST OF EXHIBITS
Exhibit No. Description of Exhibit Page
- --------------- ----------------------------------------------------------- -----------
10.7 Indemnification Agreement dated March 9, 2001 99
between the Partnership and WW Golf & Servcies, LLC
to the Partnership issued in connection with the sale of
the assets of Fox Squirrel Country Club.
16.1 Letter from KPMG Peat Marwick, L.L.P., the former *
independent accountant of the Partnership, regarding its
concurrence with the statements made by the Partnership
concerning the resignation or dismissal as the
Partnership's principal accountant. Such letter was
filed as part of Form 8-K filed on May 8, 1997.
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 P - 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.
99.5 The Robert C. Cantwell IV, MAI appraisal of the 105
Boiling Spring Lakes property dated as of December 31, 2000.
* Incorporated herein by reference.
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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 27, 2001
---------------
By: /s/ JOHN S. GRACE
------------------------------
John S. Grace
President
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25
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Changes Balance at
Beginning Costs and Add End of
Description of Period Expenses Deductions (Deduct) Period
- ----------------------------- ------------- ------------ ------------- ---------- -------------
For year ended Dec. 31, 2000
RE valuation allowance $1,871,053 $9,715 $1,277,728 $ -0- $603,040
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
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.
-24-
26
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Cost Gross
Capitalized Amount
Initial Cost Subsequent Carried
Encum- to to at End
Description brances Partnership Acquisition of Period
- --------------------------- ---------- ------------ ------------- ------------
Boiling Spring Lakes, NC:
Building lots and land $ -0- $711,531 $78,817 $790,348
Improved lot held for resale 117,454 130,047 24,629 154,676
--------- -------- ------- --------
Subtotal 117,454 841,578 103,446 945,024
Pimlico Plantation, SC:
Building lots and land -0- 500 -0- 500
--------- -------- ------- --------
Total at December 31, 2000 $117,454 $842,078 $103,446 $945,524
========= ======== ======== ========
Life Upon
Which
Depreciation
Accum- in Latest
ulated Income
Deprec- Net Date of Statement is
Description iation Book Value Acquisition Computed
- --------------------------- ---------- ------------- ------------ -------------
Boiling Spring Lakes, NC:
Building lots and land $ -0- $790,348 May 1980 N/A
Improved lot held for resale -0- 154,676 April 1999 N/A
----- --------
Subtotal -0- 945,024 N/A
Pimlico Plantation, SC:
Building lots and land -0- 500 May 1980 N/A
----- --------
Total at December 31, 2000 $-0- $945,524
===== ========
NOTES:
1. All building lots and land held for sale are unimproved.
2. The amounts shown for Boiling Spring Lakes do not reflect valuation
allowance of $603,040 at December 31, 2000. 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.
-25-
27
SCHEDULE III, CONTINUED
RECONCILIATION OF GROSS AND NET BOOK VALUE, AND ACCUMULATED DEPRECIATION
Gross Accumulated Net
Book Value Depreciation Book Value
------------------ ------------------ ------------------
Year Ended December 31, 2000
- ------------------------------
Balance at beginning of period $2,317,186 $-0- $2,317,186
Additions during period:
Acquisitions -0- -0- -0-
Improvements 10,715 -0- 10,715
Deductions during period:
Cost of real estate sold 1,382,377 -0- 1,382,377
---------- ---- ----------
Balance at end of period $945,524 $-0- $945,524
========== ==== ==========
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
========== ==== ==========
-26-
28
REEVES TELECOM
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2000, 1999 AND 1998
29
REEVES TELECOM LIMITED PARTNERSHIP
INDEX
- --------------------------------------------------------------------------------
PAGE(S)
Report of Independent Accountants 1
Financial Statements:
Balance Sheets as of December 31, 2000 and 1999 2
Statements of Operations for the years ended December 31, 2000, 1999 and 1998 3
Statements of Partners' Capital/(Deficit) for the years ended December 31, 2000,
1999 and 1998 4
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 5
Notes to Financial Statements 6 - 13
30
[PRICEWATERHOUSECOOPER LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Reeves Telecom Limited Partnership
In our opinion, the accompanying balance sheets and the related statements of
operations, of partners' capital (deficit), and of cash flows present fairly, in
all material respects, the financial position of Reeves Telecom Limited
Partnership (the "Partnership") at December 31, 2000 and 1999, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. 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 of America, 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 our opinion.
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 cash generated from individual lot sales may not be
sufficient to meet future operating costs, debt service and other cash
requirements and 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 of reported asset amounts or the amounts of
liabilities that might result should the Partnership be unable to continue as a
going concern.
/s/ PricewaterhouseCoopers LLP
January 8, 2001, except for Note 13
for which the date is March 19, 2001
Raleigh, North Carolina
31
REEVES TELECOM LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
2000 1999
ASSETS
Cash $ 223,983 $ 129,954
Prepaid expenses and inventory 18,789 4,907
Properties held for sale and property and equipment:
Properties held for sale 342,484 446,134
Sales property and equipment, net 60,456 16,557
County club property and equipment, net 452,551 497,789
----------- -----------
Total properties held for sale and property and equipment, net 855,491 960,480
----------- -----------
Total assets $ 1,098,263 $ 1,095,341
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued expenses $ 122,904 $ 102,210
Accrued expenses, affiliates 99,716 1,772,994
Long-term debt 117,454 141,696
----------- -----------
Total liabilities 340,074 2,016,900
Commitments and contingencies
Partners' capital (deficit) - issued and outstanding 1,828,148 units
at December 31, 2000 and 1999 758,189 (921,559)
----------- -----------
Total liabilities and partners' capital (deficit) $ 1,098,263 $ 1,095,341
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
32
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------
2000 1999 1998
Revenues:
Property sales $ 2,835,169 $ 555,441 $ 435,046
Interest income and finance charges 10,887 1,250 866
----------- ----------- -----------
2,846,056 556,691 435,912
----------- ----------- -----------
Expenses:
Direct costs of property sold 367,259 163,114 148,013
Selling, general and administrative expenses 511,864 494,740 390,604
Depreciation 2,681 3,144 3,262
Interest 72,929 81,081 67,817
----------- ----------- -----------
954,733 742,079 609,696
----------- ----------- -----------
Operating income (loss) 1,891,323 (185,388) (173,784)
Other income:
Rental income 3,400 -- --
Timber sales -- 1,266 --
----------- ----------- -----------
Income (loss) from continuing operations 1,894,723 (184,122) (173,784)
Loss from discontinued operations (214,975) (192,953) (162,131)
----------- ----------- -----------
Net income (loss) $ 1,679,748 $ (377,075) $ (335,915)
=========== =========== ===========
Income (loss) per partnership unit from
continuing operations $ 1.04 $ (0.10) $ (0.10)
=========== =========== ===========
Income (loss) per partnership unit $ 0.92 $ (0.21) $ (0.18)
=========== =========== ===========
Weighted average partnership units outstanding 1,828,148 1,828,148 1,828,245
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
3
33
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL/(DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------
2000 1999 1998
Partners' deficit at beginning of year $ (921,559) $ (544,484) $ (208,569)
Net income (loss) 1,679,748 (377,075) (335,915)
=========== =========== ===========
Partners' capital (deficit) at end of year $ 758,189 $ (921,559) $ (544,484)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
34
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------
2000 1999 1998
Cash flows from operating activities:
Net income (loss) $ 1,679,748 $ (377,075) $ (335,915)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 58,209 66,114 63,659
Gain on sale of residential property -- (13,364) --
Loss on sale of equipment 779 -- --
Provision for loss on property held for sale 9,715 14,961 --
Change in assets and liabilities:
Prepaid and other assets (13,882) 7,261 (12,168)
Property held for sale, net 104,651 16,041 21,495
Accounts payable and accrued expenses 20,694 22,135 14,949
----------- ----------- -----------
Net cash provided by (used in) operating activities 1,859,914 (263,927) (247,980)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of land improvements and equipment (68,365) (18,976) (199,213)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt -- 120,000 229,273
Repayment of long-term debt (24,242) (135,929) (168,106)
Increase (decrease) in accrued expenses, affiliates (1,673,278) 358,922 307,759
----------- ----------- -----------
Net cash provided by (used in) financing activities (1,697,520) 342,993 368,926
----------- ----------- -----------
Net increase (decrease) in cash 94,029 60,090 (78,267)
Cash at beginning of year 129,954 69,864 148,131
----------- ----------- -----------
Cash at end of year $ 223,983 $ 129,954 $ 69,864
=========== =========== ===========
Supplemental information:
Interest paid $ 723,755 $ 3,240 $ 9,062
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
5
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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. From the liquidation of the
remaining assets, the Partnership may acquire additional properties or
make distributions to the partners. The Partnership currently has no
intent to acquire additional properties, but is not precluded from
doing so. These financial statements have been prepared on a basis of
going concern.
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). Subsequent to year end, the Partnership sold
the golf club (Note 13). The Partnership intends to continue to sell
lots in the normal course of business as a plan of liquidation and,
while no assurances can be given, the Partnership believes the carrying
value of the remaining lots is less than their net realizable value.
Should the Partnership change its plans from the current longer term
liquidation approach to a bulk sale and/or abandonment, the net amount
realized could be less than the carrying value which could result in
liabilities exceeding the Partnership's assets.
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.
6
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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.
PROPERTIES HELD FOR SALE AND PROPERTY AND EQUIPMENT
Property 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.
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".
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Partnership considers
cash as cash on hand, cash deposited in financial institutions and
money market accounts with maturities of less than ninety days at the
date of purchase. Cash equivalents are stated at cost which
approximates market value.
CONCENTRATIONS
The Partnership's cash is placed in a major domestic bank. At December
31, 2000 the amounts on deposit exceeded the FDIC insurance limit by
approximately $177,000.
For the year ended December 31, 2000, $2,400,000 in revenue from
property sales was attributable to one buyer. Profit on these sales
amounted to $2,080,670 in the year.
ADVERTISING COSTS
Advertising costs of $33,018, $29,830 and $30,042 were expensed as
incurred during the years ended December 31, 2000, 1999 and 1998,
respectively.
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.
7
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RECLASSIFICATIONS
Certain amounts in the 1999 and 1998 financial statements have been
reclassified to conform with the 2000 presentation. The
reclassifications had no effect on previously reported net loss, or
partners' deficit.
3. PROPERTIES HELD FOR SALE AND PROPERTY AND EQUIPMENT
During December 2000, the Partnership obtained an appraisal of the
properties held for sale and the country club. Based upon the
appraisal, the valuation allowance established in previous years was
considered adequate.
A summary of properties held for sale and property and equipment at
December 31, 2000 and 1999 is as follows:
2000 1999
Properties held for sale:
Boiling Springs Lakes land held for sale $ 790,348 $2,171,725
Pimlico Plantation lots 500 500
Residential house held for sale 154,676 144,961
---------- ----------
945,524 2,317,186
Less valuation allowance 603,040 1,871,052
---------- ----------
Total properties held for sale 342,484 446,134
---------- ----------
Sales property and equipment:
Land and land improvements 59,895 13,315
Buildings 46,958 46,958
Equipment 6,282 6,282
---------- ----------
113,135 66,555
Less accumulated depreciation 52,679 49,998
---------- ----------
Total sales property and equipment, net 60,456 16,557
---------- ----------
County club property and equipment:
Land and land improvements 414,054 399,484
Buildings 257,224 250,129
Equipment 306,759 327,550
---------- ----------
978,037 977,163
Less accumulated depreciation 525,486 479,374
---------- ----------
Total county club property and equipment, net 452,551 497,789
---------- ----------
Total properties held for sale and property
and equipment, net $ 855,491 $ 960,480
---------- ----------
8
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4. ACCRUED EXPENSES, AFFILIATES
A summary of accrued expenses owed to affiliates at December 31, 2000
and 1999 is as follows:
2000 1999
General partner fees $ 73,750 $ 931,000
Legal fees 7,000 128,727
Rent 7,500 93,904
Interest 4,798 582,695
Brokerage commission -- 30,000
Fees to a former general partner 6,668 6,668
---------- ----------
$ 99,716 $1,772,994
---------- ----------
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, 2000 and 1999 consists of the following:
2000 1999
8.65% note payable in monthly installments of $1,193,
including interest, maturing March 27, 2005. Collaterized
by property with a net book value of $130,000 at
December 31, 2000 and 1999 $116,024 $ --
8.57% note payable in monthly installments of $1,430, including
interest, maturing in February 2001, collateralized by equipment
with a net book value of $14,379 and $27,161 at December 31,
2000 and 1999, respectively 1,430 21,696
Borrowings outstanding under a non-revolving credit
facility, as defined below -- 120,000
-------- --------
$117,454 $141,696
-------- --------
Periodically, the Partnership enters into non-revolving credit
facilities requiring interest only payments at the lender prime rate
plus .5% (8.5% at December 31, 1999). One year after the first draw,
the credit facilities convert into fixed-rate loans. These agreements
are collateralized by building lots in Boiling Springs Lakes.
9
39
Principal maturities of long-term debt for the years subsequent to
December 31, 2000 are as follows:
2001 $ 5,790
2002 4,752
2003 5,580
2004 5,646
2005 95,686
---------
$117,454
---------
6. RELATED PARTY TRANSACTIONS
The General Partner and its affiliates charged the Partnership for
services and office space for the years ended December 31, 2000, 1999
and 1998 as follows:
2000 1999 1998
General Partner fees $161,250 $175,000 $150,000
Legal fees 13,500 9,999 17,000
Office space 15,000 15,000 15,000
Consulting fees 240,000 -- --
Interest at 10% 141,245 158,923 125,759
-------- -------- --------
$570,995 $358,922 $307,759
-------- -------- --------
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, 2000 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.
10
40
9. LEASES
The Company leases certain office and golf course equipment under
operating leases. The minimum lease payments under operating leases
with initial terms greater than one year for the years subsequent to
December 31, 2000 are as follows:
2001 $ 9,720
2002 4,860
---------
$ 14,580
---------
Equipment rental and lease expense for the years ending December 31,
2000, 1999 and 1998 was $38,305, $36,685 and $35,854, 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, 2000 and 1999.
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.
11
41
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,
2000, 1999 and 1998 for both segments have been generated in the state
of North Carolina. Operating income (loss), net income (loss),
depreciation, identifiable assets and capital expenditures by business
segment are summarized as follows:
2000 1999 1998
Operating income (loss):
Property sales $ 1,891,323 $ (185,388) $ (173,784)
Country Club (214,975) (192,953) (162,131)
----------- ----------- -----------
Total $ 1,676,348 $ (378,341) $ (335,915)
=========== =========== ===========
Net income (loss):
Property sales $ 1,894,723 $ (184,122) $ (173,784)
Country Club (214,975) (192,953) (162,131)
----------- ----------- -----------
Total $ 1,679,748 $ (377,075) $ (335,915)
=========== =========== ===========
Depreciation:
Property sales $ 2,681 $ 3,144 $ 3,262
Country Club 55,528 62,970 60,397
----------- ----------- -----------
Total $ 58,209 $ 66,114 $ 63,659
=========== =========== ===========
Identifiable assets:
Property sales $ 616,929 $ 577,174 $ 533,518
Country Club 481,334 518,167 573,770
----------- ----------- -----------
Total $ 1,098,263 $ 1,095,341 $ 1,107,288
=========== =========== ===========
Capital expenditures:
Property sales $ 52,779 $ 3,486 $ 73,557
Country Club 15,586 15,490 125,656
----------- ----------- -----------
Total $ 68,365 $ 18,976 $ 199,213
=========== =========== ===========
12. LIQUIDITY AND GOING CONCERN ISSUES
Cash generated from individual lot sales may not be sufficient to meet
future operating costs, debt service and other cash requirements. 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 Partnership
intends to continue to sell lots in the normal course of business as a
plan of liquidation and, while no assurances can be given, the
Partnership believes the carrying value of the remaining lots is less
than their net realizable value. Should the Partnership change its
plans from the current longer term liquidation approach to a bulk sale
and/or abandonment, the net amount realized could be less than the
carrying value which could result in liabilities exceeding the
Partnership's assets. The financial statements have been prepared
assuming the Partnership will continue as a going concern.
12
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13. DISPOSAL OF BUSINESS SEGMENT
The Partnership closed a sale agreement for Fox Squirrel Country Club
on March 9, 2001. Under the agreement, the Partnership will receive
$150,000 in cash and a note for $712,500. The note accrues interest at
9.75% per annum, payable monthly, maturing on March 9, 2004. The note
is collateralized by a first mortgage on the country club. At December
31, 2000 the assets held by the Partnership covered by the agreement
were held at a net book value of approximately $470,000. The sale will
be accounted for in accordance with SFAS No. 66 "Accounting for Sales
of Real Estate".
Country Club revenues were $332,462, $355,506, and $437,436 for the
years ended December 31, 2000, 1999, and 1998, respectively.
13
43
[PRICEWATERHOUSECOOPER LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Partners
Of Reeves Telecom Limited Partnership
Our audits of the financial statements referred to in our report dated January
8, 2001, and appearing on page F-1 of this Form 10-K, also included an audit of
the financial statement schedules listed in Item 14 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
PricewaterhouseCoopers LLP
Raleigh, North Carolina
January 8, 2001