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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2002
Commission File #0-9305
REEVES TELECOM LIMITED PARTNERSHIP
(name changed from Reeves Telecom Associates)
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(Exact name of registrant as specified in its charter)
South Carolina 57-0700063
- ------------------------ -----------------------------
(State of Incorporation) (I.R.S. Employer I.D. Number)
c/o Grace Property Management Inc.
55 Brookville Road
Glen Head, New York 11545
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(Address of General Partner) (Zip Code)
(516) 686-2201
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(Registrant's telephone number including area code)
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 August 6, 2002, the registrant had outstanding 1,812,062 Partnership units.
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PART 1. FINANCIAL INFORMATION
REEVES TELECOM LIMITED PARTNERSHIP
BALANCE SHEETS
June 30, December 31,
2002 2001
(UNAUDITED) (AUDITED)
----------- ------------
Assets
- ------
Cash and cash equivalents $ 365,653 $ 296,993
Prepaid and other current assets 18,220 15,492
Properties held for sale and property
and equipment:
Properties held for sale 355,635 346,011
Sales property and equipment, net 58,666 57,993
Country club property and
equipment, net 442,587 442,587
---------- ----------
Total properties held for sale and
property and equipment, net 856,888 846,591
---------- ----------
Total Assets $1,240,761 $1,159,076
========== ==========
Liabilities and Partners' Capital
- ---------------------------------
Accounts payable and accrued expenses $ 28,071 $ 92,633
Accrued expenses, affiliates 30,418 30,418
Deposits on contract, net 240,396 200,548
Long-term Debt 110,616 112,876
---------- ----------
Total Liabilities 409,501 436,475
Partners' capital 831,260 722,601
---------- ----------
Total Liabilities and
Partners' Capital $1,240,761 $1,159,076
========== ==========
The accompanying notes are an integral part of these financial statements.
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
---------- ----------
Operating revenues:
Property sales $ 253,304 $ 348,761
Interest income and finance charges 2,932 6,624
---------- ----------
256,236 355,385
---------- ----------
Operating costs and expenses:
Direct costs of property sold 7,016 25,146
Selling, general and administrative
expenses 134,422 183,284
Depreciation 1,245 1,245
Interest 4,894 4,780
---------- ----------
147,577 214,455
---------- ----------
Income from continuing operations 108,659 140,930
Loss from discontinued operations -- (67,325)
---------- ----------
Net income 108,659 73,605
Partners' capital at beginning of period 722,601 758,189
Repurchase of partnership units -- (8,043)
---------- ----------
Partners' capital at end of period $ 831,260 $ 823,751
========== ==========
Income per partnership unit $ 0.06 $ 0.04
========== ==========
Weighted average partnership units
issued and outstanding 1,812,062 1,816,111
---------- ----------
The accompanying notes are an integral part of these financial statements.
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $108,659 $ 73,605
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,245 11,210
Change in assets and liabilities:
Prepaid and other current assets (2,728) 3,537
Property held for sale (9,624) 20,492
Accounts payable and accrued expenses (64,562) (96,406)
-------- --------
Net cash provided by operating activities 32,990 12,438
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transaction costs related to the sale
of the country club -- (9,225)
(Increase) in sales property & equipment, net (1,918) --
Deposit on contract 39,848 169,924
-------- --------
Net cash provided by investing activities 37,930 160,699
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (2,260) (2,442)
Increase (Decrease) in accrued expenses, affiliates -- (89,403)
Repurchase of partnership units -- (8,043)
-------- --------
Net cash (used in)financing activities (2,260) (99,888)
-------- --------
NET INCREASE IN CASH 68,660 73,249
CASH BALANCE - BEGINNING 296,993 223,983
-------- --------
CASH BALANCE - ENDING $365,653 $297,232
======== ========
The accompanying notes are an integral part of these financial statements.
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
---------- ----------
Operating revenues:
Property sales $ 58,045 $ 230,519
Interest income and finance charges 1,569 4,103
---------- ----------
59,614 234,622
---------- ----------
Operating costs and expenses:
Direct costs of property sold 2,376 22,012
Selling, general and administrative
expenses 68,678 84,744
Depreciation 622 622
Interest 2,461 2,667
---------- ----------
74,137 110,045
---------- ----------
Income (loss) from continuing operations (14,523) 124,577
Loss from discontinued operations -- (4,390)
---------- ----------
Net income (loss) (14,523) 120,187
Partners' capital at beginning of period 845,783 703,564
---------- ----------
Partners' capital at end of period $ 831,260 $ 823,751
========== ==========
Income (loss) per partnership unit $ (0.01) $ 0.07
========== ==========
Weighted average partnership units
issued and outstanding 1,812,062 1,812,062
---------- ----------
The accompanying notes are an integral part of these financial statements.
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(14,523) $120,187
Adjustments to reconcile net income/
(loss) to net cash provided by
operating activities:
Depreciation 622 622
Change in assets and liabilities:
Prepaid and other current assets (249) (4,107)
Property held for sale (14,265) 17,358
Accounts payable and accrued expenses 5,593 8,637
-------- --------
Net cash provided by (used in)operating
activities (22,822) 142,697
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on contract 19,924 19,924
-------- --------
Net cash provided by investing activities 19,924 19,924
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (1,116) (1,020)
Increase (Decrease) in accrued expenses, affiliates -- (128,797)
-------- --------
Net cash (used in) financing activities (1,116) (129,817)
-------- --------
NET INCREASE/(DECREASE) IN CASH (4,014) 32,804
CASH BALANCE - BEGINNING 369,667 264,428
-------- --------
CASH BALANCE - ENDING $365,653 $297,232
======== ========
The accompanying notes are an integral part of these financial statements.
REEVES TELECOM LIMITED PARTNERSHIP
JUNE 30, 2002
(Unaudited)
NOTE 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month and six month periods ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2002. For further information, refer to the
consolidated financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December
31, 2001 as filed with the Securities and Exchange Commission on April
1, 2002.
NOTE 2. 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 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 the General Partner and its
affiliates, 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.
NOTE 3. Sale of Fox Squirrel Country Club/The Lakes Country Club and Disposal
of Business Segment
During the first quarter of 2001, the Partnership completed the sale
of the assets of Fox Squirrel Country Club, now known as The Lakes
Country Club ("Fox Squirrel/The Lakes") for consideration totaling
$862,500, comprised of $150,000 in cash and a note receivable. The
note receivable had an initial principal amount
REEVES TELECOM LIMITED PARTNERSHIP
JUNE 30,2002
(Unaudited)
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 from April 9,
2001 up to and including February 9, 2004, and (ii) a final payment of
$677,642 on March 9, 2004. The note receivable is collateralized by
all of the assets sold to the buyer. Since the cash down payment
represents less than 25% of the total consideration paid for the
assets, the transaction is recorded on the Partnership's financial
statements using the deposit method as defined in Statement of
Financial Accounting Standard No. 66, "Accounting for Sales of Real
Estate". The deposit method requires, among other things, that until
the total cash received by the Partnership from the down payment and
subsequent principal payments on the note receivable is at least 25%
of the total consideration paid: (a) the sold assets remain on the
Partnership's balance sheet as assets held for sale or disposal, (b)
cash received from the buyer at closing be shown as a deposit on
contract, and (c) payments received from the buyer in respect of the
note receivable subsequent to closing be treated as an increase in the
deposit. At June 30, 2002, the assets held by the Partnership covered
by the agreement were held at a net book value of approximately
$442,587. The operations of Fox Squirrel/The Lakes prior to the sale
are recorded as discontinued operations. For the six months ended June
30, 2002 and June 30, 2001, revenues and expenses for Fox Squirrel/The
Lakes are as set forth below.
For the Six Months Ended
-------------------------------
June 30, 2002 June 30, 2001
------------- -------------
Revenue $-0- $ 32,511
---- --------
Expenses:
Direct costs of revenue -0- 5,911
Selling, general and
administrative expenses -0- 83,960
Depreciation -0- 9,965
---- --------
Total Expenses -0- 99,836
---- --------
Loss from discontinued
operations $-0- $(67,325)
==== ========
ITEM 2. Management Discussion and Analysis of Financial Condition and Results
of Operations.
Certain matters discussed herein are forward-looking statements about
the business, financial condition and prospects of the
REEVES TELECOM LIMITED PARTNERSHIP
JUNE 30,2002
(Unaudited)
Partnership. The actual results could differ materially from those
indicated by such forward-looking statements because of various risks
and uncertainties. Such risks and uncertainties may include, but are
not limited to, regional and national economic conditions, changes in
consumer demand for real estate, changes in interest rates and the
availability of credit to the Partnership and/or potential purchasers
of real estate, and changes in state and federal regulations relating
to environmental and health matters. The Partnership cannot control
these risks and uncertainties and, in many cases, cannot predict the
risks and uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements. 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.
On March 9, 2001, the Partnership completed the sale of the assets of
Fox Squirrel/The Lakes for consideration totaling $862,500, comprised
of $150,000 in cash and a note receivable. The note receivable had 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 from April 9, 2001 up to and including February 9,
2004, and (ii) a final payment of $677,642 on March 9, 2004. The note
receivable is collateralized by all of the assets sold to the buyer.
The operations of Fox Squirrel/The Lakes prior to the sale are
recorded as discontinued operations. 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. If the maturity of the
note receivable is extended, the borrower will continue making monthly
payments of $6,641 until the extended maturity date, at which time the
remaining unpaid principal balance will be due and payable.
The Partnership completed work involving the remediation of certain
environmental contamination on the grounds of Fox Squirrel/The Lakes
in 2000. Initial tests of groundwater and soil samples submitted to
the North Carolina Department of Environment and Natural Resources
("NCDENR") showed levels of groundwater contamination just above the
standards, and the Partnership was directed to conduct additional
groundwater monitoring and sampling. Tests of groundwater samples
submitted to NCDENR in November 2001 showed levels of contamination
below standards. Nevertheless, NCDENR directed the Partnership to
conduct additional groundwater monitoring and sampling. Although
Management believes that subsequent tests of groundwater samples will
also show levels of contamination below standards, there is no
assurance that NCDENR will not direct the Partnership to continue
monitoring and sampling of groundwater.
REEVES TELECOM LIMITED PARTNERSHIP
JUNE 30,2002
(Unaudited)
Revenue from property sales for the first six months of 2002 was
$253,304, compared to $348,761 for the first six months of 2001.
Management attributes the decrease principally to a decrease in the
number of individual undeveloped lots sold, which, in turn, reflects a
somewhat slower real estate market in Brunswick County, North Carolina
in 2002 than in 2001. The Partnership sold 12 individual undeveloped
lots during the first six months of 2002, compared to 52 in the same
period last year (of which 30 lots were sold to a single buyer). The
average sales price per lot sold was higher for the first six months
of 2002 than for the same period last year, however, which is due
principally to the relative mix of lots sold. Lots adjoining or close
to the golf course for example, generally sell for more than lots that
are not close to the golf course, and lots which are suitable for the
installation of individual on-site septic systems generally sell for
more than lots which are not suitable for septic systems. In addition,
the Partnership sold 2 tracts of land, comprising approximately 6
acres, during the first six months of 2002, compared to 2 tracts,
comprising approximately 23 acres, sold during the first six months of
2001.
Direct costs of property sold for the first six months of 2002 and
2001 were $7,016 and $25,146, respectively. Management attributes the
decrease in costs principally to the lower number of individual
undeveloped lots sold in 2002 than in 2001.
Selling, general and administrative expenses were $134,422 for the
first six months of 2002, compared to $183,284 for the same period of
2001. Management attributes the decrease principally to the lower
total fees charged by the General Partner following the sale of
Fox Squirrel/The Lakes in 2001.
The sale of Fox Squirrel/The Lakes was completed on March 9, 2001.
As a result, the operations of Fox Squirrel/The Lakes are recorded as
discontinued operations. Accordingly, there are no financial results
of operations at Fox Squirrel/The Lakes reported for the first six
months of 2002 and the financial results reported for the first
six months of 2001 are for less than a full six months. For the six
months ended June 30, 2002 and June 30, 2001, revenues and expenses
for Fox Squirrel/The Lakes are as set forth below.
REEVES TELECOM LIMITED PARTNERSHIP
JUNE 30,2002
(Unaudited)
For the Six Months Ended
-----------------------------
June 30, 2002 June 30, 2001
------------- -------------
Revenue $-0- $ 32,511
---- --------
Expenses:
Direct costs of revenue -0- 5,911
Selling, general and
administrative expense -0- 83,960
Depreciation -0- 9,965
---- --------
Total Expenses -0- 99,836
---- --------
Loss from discontinued
operations $-0- $(67,325)
==== ========
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
99.1 Certification by chief executive officer of this report on
Form 10-Q, as required by Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350), the original of which
has been submitted to the Securities and Exchange
Commission.
99.2 Certification by chief financial officer of this report on
Form 10-Q, as required by Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350), the original of which
has been submitted to the Securities and Exchange
Commission.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K for the quarter ended June 30,
2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
REEVES TELECOM LIMITED PARTNERSHIP
By: Grace Property Management Inc.
General Partner
By: /s/ JOHN S. GRACE
-----------------------
John S. Grace
President
Dated: August 12, 2002