SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number 0-13174
THE MARINA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
INDIANA 35-1689935
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11691 Fall Creek Road, Indianapolis, IN 46256
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 845-0270
Name of each exchange on which registered:
None
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partner Units and Depositary Receipts
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of the Limited Partner Units held by non-affiliates
of the registrant, based upon the average bid prices of such units during the 60
day period ended March 23, 1998, and assuming solely for purposes of this
calculation that all executive officers and Directors of the registrant are
affiliates, was approximately $12,613,000. The source of the bid quotation is
the matching service made available by the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1 - Business...........................................................
Item 2 - Properties.........................................................
Item 3 - Legal Proceedings..................................................
Item 4 - Submission of Matters to a Vote of Security Holders................
PART II
Item 5 - Market for Partnership's Common Equity
and Related Security Holder Matters...............................
Item 6 - Selected Financial Data...........................................
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................
Item 8 - Financial Statements and Supplementary Data.......................
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................
PART III
Item 10 - Directors and Executive Officers.................................
Item 11 - Executive Compensation...........................................
Item 12 - Security Ownership of Certain Beneficial Owners
and Management...................................................
Item 13 - Certain Relationships and Related Transactions...................
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..............................................
SIGNATURES.................................................................
<PAGE>
PART I
ITEM 1. BUSINESS.
General
The Marina Limited Partnership (the "Partnership") was organized as an
Indiana limited partnership under the laws of the State of Indiana on October 7,
1986 for the purpose of reorganizing the business of The Marina Corporation (the
"Company"). The Company was reorganized into a publicly traded limited
partnership in order to eliminate the "double" federal income tax on its future
earnings and distributions. The Partnership is the successor-issuer to the
Company. On December 29, 1986, the shareholders of the Company approved the plan
to reorganize the Company into the Partnership. On December 30, 1986, pursuant
to the plan of reorganization, all of the assets and liabilities of the Company
were transferred to the Partnership in exchange for a number of units of
interest ("Units") in the Partnership equal to the number of outstanding shares
of the Company's Common Stock, and the Company distributed the Units to or for
the benefit of its shareholders. Units represent either general partner
interests ("General Partner Units") or limited partner interests ("Limited
Partner Units"). See Item 5, "Market for Partnership's Common Equity and Related
Security Holder Matters." Following the distribution of the Units, the Company
was dissolved.
The Partnership's principal executive offices are located at 11691 Fall
Creek Road, Indianapolis, Indiana 46256, and its telephone number is
317/845-0270. The affairs of the Partnership are managed by its general partner,
The Marina II Corporation (the "General Partner"), an Indiana corporation. The
General Partner's principal executive offices and telephone number are the same
as those of the Partnership.
Effective as of the close of business on December 19, 1997, the Partnership
requested that the Limited Partner Units cease being listed on The NASDAQ
SmallCap tier of The NASDAQ Stock Market. After that date, transfers of Limited
Partner Units will be recognized by the Partnership only if they are made
through the matching service that has been established by the Partnership. The
Partnership determined that these actions were necessary to ensure it would
continue to be treated as a partnership for federal income tax purposes. See
"Taxation of Interests in Publicly Traded Partnerships," below.
Investment Real Estate
On December 31, 1997, the Partnership owned approximately 342 acres of
investment real estate. Approximately 278 acres of this investment real estate
are adjacent to Geist Lake, and approximately 64 acres are adjacent to Morse
Lake. Substantially all of the properties consist of partially wooded, gently
rolling land adjacent to the lakes. Homesite sales revenue accounted for 31
percent of the Partnership's revenues for 1997, 44 percent for 1996, and 50
percent for 1995. Gains on sale of investment land accounted for 7 percent of
the Partnership's revenues for 1997, 1 percent for 1996, and 5 percent for 1995.
<PAGE>
Geist Lake. Geist Lake is an artificially created reservoir located within
15 to 20 miles driving distance of the downtown business district of
Indianapolis, Indiana. On December 31, 1997, the Partnership's investment real
estate at Geist Lake consisted of approximately 278 acres, which are zoned
either for single-family residential use, multi-family residential use,
commercial use, recreational use, or agricultural use. Approximately 18 acres of
the land at Geist Lake is being used for Geist Marina and Marina Village. See
"Marine Operations" and "Investment Real Estate -- Commercial Development"
below.
Morse Lake. Morse Lake is an artificially created reservoir located within
25 to 30 miles driving distance of the downtown business district of
Indianapolis, Indiana. On December 31, 1997, the Partnership's investment
properties at Morse Lake consisted of approximately 64 acres zoned for
single-family residential, commercial, and agricultural use. Approximately 18
acres of the land at Morse Lake is being used for the Morse Marina. See "Marina
Operations" below.
Residential Development. Bridgewater, located near Geist Marina, was the
Partnership's first single-family project. It includes 81 homesites, of which
development is substantially complete. The Partnership sold seven waterfront
homesites from Bridgewater in 1997. Homesite revenue from these sales was
$1,427,000. Homesite inventory in Bridgewater at December 31, 1997 consists of
10 waterfront homesites.
The Partnership sold 13 homesites in 1997 from Cambridge, a single-family
residential development located at Geist Lake. In 1997, homesite revenue from
such Cambridge sales was $983,000. Marina I, a joint venture, sold 21 homesites
from Cambridge in 1997. See "Marina I" below. At December 31, 1997, the
Partnership had 10 homesites remaining to be sold, of which six are waterfront,
while Marina I had 83 homesites remaining to be sold, of which 34 are
waterfront. Marina I developed 39 waterfront homesites which were finished in
mid-1997. When complete, Cambridge will include more than 400 homesites of which
287 have been developed. Most of the homesites owned entirely by the Partnership
have been sold so that future homesite sales will be from The Marina I L.P.
The Partnership substantially completed development of Morse Overlook in
1996, an upscale single-family homesite project located at Morse Lake. In 1997,
the Partnership completed development of an additional seven waterfront
homesites. Morse Overlook now includes 50 homesites, of which 27 are waterfront.
In 1997, the Partnership sold one waterfront homesite from Morse Overlook. This
sale generated homesite revenue of $171,000. At December 31, 1997 the
Partnership had 45 homesites in inventory of which 22 were waterfront. In 1997,
the Partnership spent $206,000 on construction costs for a speculative home at
Morse Overlook.
<PAGE>
During 1997, the Partnership commenced development of Sail Place, a new
residential development at Geist Lake. This development will include 30
homesites. The Partnership intends to build specially designed homes with
smaller homesites and a unique package of services to appeal to a more mature
customer. The Partnership intends to build all of the homes in Sail Place to
better control placement and the design of each home. The Partnership began
construction in fall 1997, but the sale of finished homes will not occur until
spring 1998. The Partnership spent approximately $746,000 for the development of
Sail Place, and an additional $363,000 for construction of two speculative homes
at Sail Place in 1997. One home is complete with the second approximately 50%
complete. A third home has been started and it is anticipated that an additional
$400,000 will be expended for completion of these homes in 1998.
The Partnership's current land ownership and the land owned by Marina I
will take a number of years to develop and sell under reasonable market
conditions. However, due to a sand and gravel mining project in Geist Lake by
Irving Materials, Inc. ("Irving"), the availability of some of the land for
residential development by Marina I may be delayed for six years or more. The
Partnership may acquire additional land for development during this period to
properly balance the mix of off-water homesites to waterfront homesites and to
continue development until the balance of the Irving land is available. The
Partnership expects to have a sufficient inventory of homesites for 1998. See
"Investment Real Estate -- Marina I," below.
Homesite Financing Arrangements. The Partnership sells residential
homesites for cash or contract. The Partnership finances homesite purchases, and
requires a minimum down payment of 10% of the price of the homesite. The balance
of the contract price, plus interest, is payable over seven years, although
typically most contracts are paid in full within two years. When a homesite is
sold to an individual purchaser on contract, a warranty deed is conveyed to the
purchaser, and the purchasers execute an installment promissory note and a
purchase money real estate mortgage to the Partnership. However, when a homesite
is sold to a builder pursuant to the terms of a builder contract, the warranty
deed conveying title of the homesite is not executed until the builder contract
has been paid in full. In 1997, 1996 and 1995, interest rates on homesites sold
on contract were 9% the first year, 10% in the second year, and 12% for the
remainder.
Marketing. The Partnership has a builder support program with limited
financial incentives for builders who build in the Partnership's residential
projects. The portion of the homesite sales price, which may be refundable under
builder programs if the home remains on the market for four to eight months
after completion, is deferred until the refund period expires. There was no
deferral for the builder support program at December 31, 1997. There were no
payments made to builders under the builder support program in 1997.
<PAGE>
Commercial Development. The Partnership continues to develop and sell land
at Geist Crossing, a shopping center site near Geist Lake. During 1997, the
Partnership sold three parcels of land for a total of $1,098,000. There is one
outlot left to sell at Geist Crossing.
Marina Village. The Partnership began operating a 21,000 square foot retail
and office development known as Marina Village in 1995. This building includes
15,000 square feet of retail space for and 6,000 square feet of office space,
all of which has been leased except for 2,000 square feet which is the office of
the Partnership. The Partnership realized $210,600 in rental income from Marina
Village in 1997. The Partnership spent approximately $80,000 for tenant
finishings in 1997. When the Partnership completes the new service building at
Geist Marina (see "Marine Operations" below), the waterfront land currently
occupied by the service buildings will be available for either apartment or
retail development.
Marina I. The Partnership is the general partner of The Marina I L.P., an
Indiana limited partnership ("Marina I"), and Irving Materials, Inc. ("Irving")
is the sole limited partner. Marina I has a right to receive and develop more
than 150 acres of Irving land in the vicinity of Geist Lake. Irving continues to
mine and extract sand and gravel from the remaining property, and it contributes
parcels of the land to Marina I when it has completed the extraction. In 1997,
Irving increased its investments in Marina I with a contribution of land for
section eight in Cambridge. Marina I owns 73 acres of land held for development
and has 83 finished homesites available. The Partnership is responsible for
developing and selling the property for residential use.
The Partnership, as general partner, and Irving, as limited partner,
received $495,000 and $429,000, respectively, in distributions during 1997.
Marina I received $104,600 from the Partnership in 1997 as its share of revenue
on homesites sold by the Partnership in section 5 of Cambridge that were
partially owned by Marina I. Additionally, the Partnership recognized $962,000
in equity earnings from Marina I for the 21 homesites sold in Cambridge and
other related activities in 1997. See "Investment Real Estate -- Residential
Development" above.
Flatfork Creek Utility. The Partnership and Irving are each 50 percent
shareholders of Flatfork Creek Utility, Inc., an Indiana corporation (the
"Corporation.") The Corporation was formed to complete the construction of and
operate the wastewater treatment plant and interceptor sewer lines to service
land in the northeast Geist area. Construction of the interceptor sewer line and
the first phase of the wastewater treatment plant was completed in 1994. The
first phase of the plant will serve approximately 430 homes. The Corporation is
subject to regulation by the Indiana Utility Regulatory Commission. The
Corporation recorded a $41,000 net income for 1997, of which the Partnership
accounted for its 50% share as an increase in its investment in the Corporation.
The Corporation expects minor operating losses for the next several years. The
Corporation has a $1,567,000 bank loan outstanding at December 31, 1997 that the
Partnership and Irving have each guaranteed. In January 1997, the Partnership
and Marina I contributed $197,000 and $590,000, respectively, as advance
payments for future utility hookups. The Corporation applied $700,000 from these
advance payments against the outstanding bank loan in 1997 to reduce it to the
present balance.
<PAGE>
Dockside Cafe. The Partnership is a limited partner of Dockside Cafe L.P.,
an Indiana limited partnership ("Dockside Cafe"), which operates the Blue Heron
restaurant in Marina Village at Geist Lake and Carrigan Crossing at Morse Lake.
The Partnership received $67,000 in distributions from Dockside Cafe in 1997.
The Partnership has leased the restaurants to Dockside Cafe, and realized
$220,000 in rental income in 1996.
Marine Operations
The Partnership owns two marinas located at Geist and Morse Lakes. The
marinas consist of approximately 1,200 boat docks, two public access boat
launching ramps, and several storage and other buildings. The operating season
for the marinas depends upon weather conditions, but is typically from the
middle of April through the middle of October. The Partnership spent
approximately $270,000 in 1997 for construction of a new marine building at the
Geist Marina, which will include a boat sales area, an area for marine supplies
and four service bays. An estimated $230,000 in additional expenditures is
anticipated to complete the building for occupancy in early 1998.
Marine operations accounted for 43 percent of the Partnership's revenues in
1997, 41 percent in 1996, and 30 percent in 1995. The principal sources of
revenues are from the rental of boat docks, boat launching fees, boat sales,
service repair work and, to a lesser extent, from winter boat storage, and the
sale of gasoline, boating supplies, boat docks and lifts, food items and
miscellaneous services.
The marine operations are affected by inclement weather, which tends to
discourage boating and reduce revenues. Also, because Geist and Morse Lakes are
reservoirs for the Indianapolis area water supply, the levels of the lakes may
fall during drought periods, making boating hazardous and reducing recreational
use.
Recreational Facilities
In March 1995, the Partnership purchased the recreational facilities at
Geist Lake for $425,000 from The New Shorewood Limited Partnership
("Shorewood"), the successor to The Shorewood Corporation. The recreational
facilities include a clubhouse and two separate pools located near Geist Lake.
The Partnership removed a pool in the fall of 1996 to prepare for the
development of Sail Place, see "Investment Real Estate - Residential
Development" above. The Partnership built a new pool near the clubhouse in 1997
for approximately $188,000 to replace the former pool. The operating season for
the pools begins on the Memorial Day weekend and extends to the Labor Day
weekend but the clubhouse is available for rental throughout the year. The
Partnership's residential developments have access to these recreational
facilities, as do residents of Shorewood developments at Geist Lake.
<PAGE>
Future Operations
The General Partner expects that the Partnership will continue to: (1) sell
investment real estate from time to time depending on market conditions and
other factors; (2) pursue development activities, including the building of
homes on the Partnership's real estate; (3) seek to enhance the value of the
Partnership's investment real estate by making certain improvements and by
acquiring additional surrounding real estate; (4) acquire additional real estate
for investment; and (5) operate the marine business. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Competition
Investment Real Estate. Although there are numerous real estate properties
in the Indianapolis metropolitan area available for development of homesites,
there are only a limited number of water-oriented properties. The Partnership
believes that, of those water-oriented properties that are or will be
economically suitable for development of homesites, the Partnership's properties
are among those with the greatest long-term development potential, primarily
because of the character of the lakes to which the Partnership's properties are
adjacent and the extent and types of development at such lakes. There are,
however, water-oriented properties owned by other developers that are available
for development of homesites that are equally desirable. There is a new
residential project currently under development by a local developer at the
north end of Geist Lake which will include approximately 300 homesites, of which
approximately 30 to 40 will be waterfront homesites. Competition in commercial
development has become more significant due to the increased zoning of land for
commercial use in the area of Geist Lake.
Marine Operations. The Geist Marina provides the only boat docks, gas pumps
and launching ramps on Geist Lake available to the general public. At Morse
Lake, the Town of Cicero operates boat docks and gas pumps in competition with
the Morse Marina.
There are numerous marine dealers in the Indianapolis market and therefore
competition is significant in the boat sales and service area.
<PAGE>
Regulation
The Partnership's real estate is subject to governmental regulations,
particularly zoning regulations, restrictions on construction in flood plains,
wetlands protection, and restrictions on water and septic systems. To the extent
applicable, any developer of the property must comply with such regulations, as
well as the Federal Interstate Land Sales Full Disclosure Act, water pollution
and water quality control regulations, and other miscellaneous regulatory
requirements. The Partnership cannot predict the cost or effect of future
regulations on the development potential of its real estate.
Employees
The Partnership has 30 full-time employees (most of whom are primarily
engaged in marine operations) and a number of part-time employees who work on a
seasonal basis. The General Partner is responsible for the management of the
Partnership's affairs. There are three officers of the General Partner, all of
whom devote their full-time duties to activities of the General Partner and the
Partnership.
Taxation Of Interests In Publicly Traded Partnerships
Until the close of business on December 19, 1997, the Partnership was a
publicly traded partnership (PTP) under the definitions set forth in Internal
Revenue Code Section 7704. Section 7704 provides that a PTP will be treated by
the Internal Revenue Service as a corporation, and thus be subject to double
taxation instead of the usual "pass-through taxation" of a partnership, unless
the PTP meets certain income requirements, which are discussed below. The
Partnership is not subject to these requirements until January 1, 1998 because
it was a PTP at the time Section 7704 was adopted and, therefore, was exempted
from the application of Section 7704 through 1997 as long as it did not engage
in a substantial new line of business.
A PTP is treated as a corporation for federal income tax purposes unless 90
percent or more of the partnership's gross income for each tax year is
"passive-type income." In general, income from the Partnership's real estate
activities qualifies as passive-type income, while income from the operation of
the two marinas and the recreational facilities and from the Partnership's
interests in Flatfork Creek Utility, Inc. and Dockside Cafe L.P. does not
qualify as passive-type income. The General Partner believed that, unless
actions were taken during 1997 to cease being classified as a PTP, it was likely
the Partnership would be taxed as a corporation commencing January 1, 1998
because it was expected that less than 90 percent of the Partnership's gross
income would be passive-type income.
<PAGE>
The General Partner believed it was desirable to continue to be treated
as a partnership for federal income tax purposes. As a result, the Partnership
elected to de-list from NASDAQ effective as of the close of business on December
19, 1997, in order to avoid continuing to be classified as a PTP. After that
date, transfers of Limited Partner Units are recognized by the Partnership only
if they are made through the matching service established by the Partnership.
The only exceptions to this restriction are certain transfers among family
members and transfers by reason of death.
In order to ensure that the Partnership will continue to be treated as a
partnership for federal income tax purposes, the matching service will strictly
follow rules and regulations created by the Internal Revenue Service. To buy or
sell under the matching service, a person will need to contact the Partnership's
office and express an interest to either (i) buy or sell at a certain price
determined by the person (a "non-firm price quote"), or (ii) buy or sell without
an accompanying price (a "non-binding indication of interest"). Neither a
non-firm price quote nor a non-binding indication of interest commits a person
to buy or sell. The Partnership will record the person's information on a quote
sheet, including the number of units to be bought or sold if appropriate, and
send that person a copy of the quote for confirmation. All information
concerning quotes and indications of interest will be made known to inquiring
partners and potential buyers.
If a person has expressed a desire to sell, the Partnership is required to
wait at least 15 calendar days from the "contact date" (the date the Partnership
receives written confirmation from the listing person that Limited Partner Units
are available for sale) before information is made available to potential buyers
or to the seller.
The closing of a sale may not occur less than 45 calendar days after the
contact date. A seller may specify a time period after which the seller's
information is removed from the list. In no event may the seller's information
be made available to potential buyers after 120 days from the contact date.
After the seller's information is removed from the matching service, the seller
may not list with the matching service for at least 60 calendar days. A buyer
may specify a time after which the buyer's information is removed from the list.
The buyer's information will be deleted from the list after 120 days from the
contact date, unless the buyer specifies a shorter time period. However, unlike
a seller, a buyer may immediately enter another quote or indication of interest
onto the list.
<PAGE>
If a match or potential match is made, both the buyer and seller will be
notified. Each such party will be notified of the other party's quote, and if no
exact match is made, either party may submit a written offer, which will be
conveyed to the other party. Once a match is reached between a buyer and seller,
the Partnership will notify both parties and indicate a closing date in
accordance with IRS rules and regulation. The seller will submit the
certificates for the Limited Partner Units being sold on or before the closing
date, and the buyer will submit a check, made out in the seller's name, to the
Partnership or its transfer agent. The check will be forwarded to the seller and
the transfer agent will prepare a new certificate in the buyer's name. In some
circumstances, the Partnership may reserve the right to postpone closings
immediately prior to the distribution to the partners.
The total number of Limited Partner Units that may be sold through the
matching service in any calendar year is limited to 10% of all the outstanding
units, which is presently 41,700 units. If that limit is reached, which seems
unlikely given the past trading volume, the Partnership will halt sales through
the matching service until the next year.
Because the matching service is a new system, the Partnership may refine
the procedures for its operation over time. In addition, Congress or the IRS may
adopt new laws, rules and regulations impacting the matching service's
procedures that would require the Partnership to make changes to the procedures
or adversely affect its ability to offer the matching service.
The Internal Revenue Code also provides that the passive-loss rule of
Section 469 is to be applied separately for the tax attribute items of each PTP,
and that a partner's share of net income from a PTP will generally not be
treated as income from the passive activity but rather as portfolio income. In
general, under these separate application rules, the income from the
Partnership, while it was a PTP, may not offset losses from a partner's other
passive activities.
ITEM 2. PROPERTIES.
The Partnership's properties are substantially described in Item 1 of this
Part I. See "Investment Real Estate" and "Marine Operations."
The Partnership has title to all of its real estate, substantially all of
which has been covered by blanket title insurance commitments. All of the
properties are subject to certain telephone, highway, pipeline and electric
power line easements. The Morse and Geist Lake properties are also subject to
the easements and restrictions of the Indianapolis Water Company ("IWC"), which
owns the reservoirs for water supply purposes. In connection with the
maintenance, protection and operation of its water supply reservoirs, IWC has
retained a 20-foot easement around the shoreline of both reservoirs and has
imposed restrictions on the adjacent land. IWC is permitted access to the lakes
for all purposes reasonably necessary to their operation and maintenance as
reservoirs, and certain uses of the land that could cause pollution of the lakes
are prohibited. There are no mortgages on the Partnership's real estate
properties.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
There is no material proceeding in which any director, officer or affiliate
of the Partnership, or any associate of any such director or officer, is a
party, or has a material interest, adverse to the Partnership. The Partnership
is not involved in any administrative or judicial proceedings arising under any
federal, state or local provisions which have been enacted or adopted to
regulate the discharge of materials into the environment or otherwise relating
to the protection of the environment other than those normally encountered as
part of the development business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders of the Partnership in
the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS.
Effective as of the close of business on December 19, 1997 the Partnership
requested that the Limited Partner Units cease being listed on The NASDAQ
SmallCap Market tier of The NASDAQ Stock Market under the symbol MRNCZ. The
following table sets forth for the periods indicated the representative high and
low trade prices of the Partnership's Limited Partner Units as reported by
NASDAQ through December 19, 1997. Such prices represent actual transactions.
<PAGE>
1996 1997
---- ----
High Low High Low
Fiscal Quarter Ended Trade Trade Trade Trade
March 31 $32 $31 1/2 $28 1/8 $28
June 30 30 28 33 28
September 30 28 28 33 1/2 27
December 31 28 28 33 29 1/8
There is no established public trading market for the Limited Partner
Units. During the 60-day period that ended March 23, 1998, there were two bids
to purchase at $31.00 per unit. The source of the bid quotations is through a
matching service made available by the Partnership, and the bids represent
non-binding indications of interest in buying and not a firm commitment to buy.
On March 23, 1998 there were approximately 420 record holders of Limited Partner
Units of the Partnership.
On each of April 17,1997 and April 18, 1996, the Partnership made cash
distributions of $3.25 per unit. No other cash distributions were made during
1996 and 1997.
The General Partner intends to cause the Partnership to make cash
distributions from its net cash flow as often as the General Partner, in its
discretion, believes it to be feasible and prudent for the Partnership. Although
the number, amount, and timing of cash distributions in any given year may vary
substantially, it is currently anticipated that the Partnership will make cash
distributions in an amount sufficient to cover the tax liability incurred by
Partners from Partnership operations. The preceding discussion regarding cash
distributions are forward looking statements. There can be no assurance as to
the amount or timing of Partnership cash distributions, and the Partnership is
not obligated to make any such distributions.
Pursuant to the reorganization of the Company into the Partnership, Units
in the Partnership received by the Company (and subsequently distributed to the
shareholders of the Company) were divided between General Partner Units and
Limited Partner Units. The economic interests in the Partnership represented by
a General Partner Unit and Limited Partner Unit are identical. General Partner
Units are vested with the authority to manage the affairs of the Partnership.
Limited Partner Units carry no management authority.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the years in the
five year period ended December 31, 1997 are derived from the financial
statements of the Partnership, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The financial statements for the years
ended December 31, 1997, 1996, and 1995, and the auditors' report thereon, are
included in Part II, Item 8.
<PAGE>
(In thousands, except per unit or share amounts)
Years Ended December 31,
Selected Statement of 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Earnings Data:
Homesite sales $2,733 $3,387 $4,992 $3,331 $2,061
Marina revenues 3,791 3,156 3,065 3,062 2,451
Gain on land sales 661 40 498 67 229
Equity in earnings of
investee companies 992 386 920 693 45
Other revenues 726 723 602 409 369
Earnings before
income taxes 3,742 3,034 4,391 2,705 1,739
Net earnings 3,742 3,034 4,391 2,705 1,739
Earnings per
unit (1) 5.54 4.49 6.50 4.01 2.57
Cash distribution
per unit (1) 3.25 3.25 2.00 1.00 .85
As of December 31,
Selected Balance Sheet 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Data:
Total assets $20,038 $18,450 $17,691 $14,459 $12,449
Debt obligations - - - - -
Partners' equity 19,178 17,630 16,786 13,744 11,708
1 Earnings and cash distribution per unit have been calculated on the
following basis:
<TABLE>
Earnings Cash Distribution
General Limited General Limited
Period Partner Units Partner Units Partner Units Partner Units
------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
1997 201,188 473,947 201,188 473,947
1996 196,714 478,421
July 1 - Dec.31 201,188 473,947
Jan 1 - June 30 196,714 478,421
1995 196,714 478,421 196,714 478,421
1994 196,714 478,421 196,714 478,421
1993 179,949 495,186
July 1 - Dec. 31 196,714 478,421
Jan. 1 - June 30 179,949 495,186
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis is intended to address the
significant factors affecting the Partnership's results of operations and
financial condition. It is designed to provide a more comprehensive review of
the operating results and financial position than could be obtained from an
analysis of the financial statements alone. It should, however, be read in
conjunction with the financial statements and related notes, and the Selected
Financial Data, included elsewhere herein. Also see Item 1 - "Business" for
additional discussion of operations.
General
The Partnership's principal sources of revenue in 1997 were consistent with
1996, and included revenue from homesite sales, marine operations, equity in
earnings of investee companies, and interest and rental income.
The Partnership's primary sources of revenue were from homesite sales,
which accounted for 31 percent in 1997 compared with 44 percent for 1996 and 50
percent in 1995, and marine operations, which accounted for 43 percent of the
Partnership's revenues in 1997 as compared to 41 percent in 1996 and 30 percent
in 1995. In addition, equity in earnings from investee companies accounted for
11 percent of revenue in 1997 as compared to 5 percent in 1996 and 9 percent in
1995.
Homesite Sales
During 1997, the Partnership sold 21 homesites which compares to 26
homesites sold in 1996 and 44 in 1995. The following table illustrates the
dispersion of homesite sales by community:
Year Bridgewater Cambridge Morse Overlook
----------- --------- --------------
1997 7 13 1
1996 4 18 4
1995 4 40 0
The Partnership is the general partner of The Marina I L.P. ("Marina I"),
which has developed homesites in Cambridge. During 1997, Marina I sold 21
homesites from Cambridge as compared to 17 homesite sales in 1996 and 31 in
1995. Marina I recorded $104,600 in revenue during 1997 as its share from the
Partnership's sale of a homesite that was partially owned by Marina I, as
compared to $151,000 in 1996.
<PAGE>
The Partnership received distributions of $495,000 from Marina I in 1997 as
compared with $398,000 in 1996 and $810,000 in 1995.
The Partnership's development or sales of investment real estate and
residential homesites is affected by several factors such as economic
conditions, interest rates, zoning, environmental regulation, availability of
utilities, population growth in the area, and competition.
Marine Operations
The principal sources of revenues for the marine business are the rental of
boat docks, boat launching fees, boat sales, and service repair work. To a
lesser extent, revenues are generated from winter boat storage, and the sale of
gasoline, boating accessories, boat docks, lifts, food items and miscellaneous
services. Most docks at the Morse Marina and Geist Marina are rented for the
April to October boating season. Annual dock rental payments are due prior to
the beginning of the boating season resulting in the majority of cash being
received during the first six months of the year; most expenses, however, occur
during the peak boating months of the summer. Boat dock revenues are deferred
when received and recognized as earned during the boating season. Winter boat
storage generates revenues for the October to April storage season, and is
recognized as earned during the storage season.
The Partnership's marine operations are affected by weather conditions,
since inclement weather tends to discourage boating and reduce revenues. Also,
because Geist and Morse Lakes are reservoirs for the Indianapolis area water
supply, the levels of the lakes may fall during drought periods, making boating
hazardous. Marine operations are also affected by economic conditions, including
inflation. During recessionary periods, recreational boating decreases and
revenues from the operation of the marinas decrease accordingly. Increases in
the cost of boating caused by inflation also adversely affect the Partnership.
Liquidity and Capital Resources
The General Partner of the Partnership believes that current funds and
funds generated by homesite sales, marine operations, land sales, and bank loans
will be sufficient to satisfy its working capital requirements through the end
of 1998. On December 31, 1997, the Partnership had cash and cash equivalents,
including short-term investments, of $5,532,000. On December 31, 1997, the
Partnership did not have any significant contractual commitments for capital
expenditures to be made during 1998. During 1997, the Partnership expended
approximately $1,724,000 for home and homesite development costs. In addition,
approximately $255,000 was spent for the Partnership's commercial properties,
and $740,000 was expended for marina property and equipment.
<PAGE>
On a long-term basis, major sources of liquidity are expected to be
revenues from marine operations, sales of homesites and investment land,
distributions from investee companies, and if necessary, bank borrowings. The
Partnership currently expects that funds from current reserves, operating cash
flow, and normal short-term lines of credit will be sufficient to satisfy future
capital needs.
Results of Operations
1997 Compared to 1996. Net earnings increased by $709,000 in 1997 from
1996. This increase was primarily due to increased equity earnings from Marina I
of $510,000, an increase in earnings after direct costs of $240,000 from marine
operations, and an increase in gains on the sale of investment land of $621,000.
Such increases were partially offset by a decrease in earnings from the sale of
homesites of $640,000.
Earnings from homesite sales were $1,368,000 in 1997, which compares to
$2,008,000 in 1996. There was an increase in net earnings per homesite sale in
1997 as a result of the sale of a higher percentage of waterfront homesites.
The Partnership recognized $962,000 as its share of the earnings from
Marina I in 1997, compared to $461,000 in 1996. Such increase is the result of
an increase in homesite sales to $3,057,000 in 1997 as compared to $1,364,000 in
1996.
The decrease in the Partnership's income from homesite sales is
substantially offset by the increase in equity income from Marina I. This is the
result of the remaining Cambridge homesites being predominantly owned by Marina
I rather than the Partnership; therefore, future homesite sales from Cambridge
will be substantially from Marina I. The sales by Marina I are not reflected in
homesite sales in the Partnership's Statement of Earnings, rather the
Partnership's share of net earnings is included as equity in earnings on the
Statement of Earnings.
During 1997, the Partnership sold commercial property held for investment
at Geist Crossing for an aggregate $1,307,000, which resulted in a gain of
$661,000 compared to a gain of $40,000 in 1996.
Earnings from marine operations increased in 1997 over 1996 as a result of
an increase in revenues of $634,000. This results from increases in all
significant areas of marine operations.
The Partnership is a 50 percent owner in Flatfork Creek Utility, Inc. (See
Item 1 "Business") As a result, the Partnership recognized equity income in 1997
of $20,000 compared with an equity loss of $$90,000 in 1996. Flatfork expects
minor operating losses for the next several years.
<PAGE>
General and administrative expenses increased by $117,000 in 1997 compared
to 1996. The principal increase relates to increases of $28,000 in property
taxes, $48,000 in professional fees and $55,000 in employee costs. All other
elements of general and administrative expense were generally consistent in 1997
with 1996.
On April 17, 1997, the Partnership made a cash distribution to the partners
of record on April 3, 1997, of $3.25 per unit of partnership interest, for a
total of $2,194,000.
1996 Compared to 1995. Net earnings decreased by $1,358,000 in 1996 from
1995. This decrease was primarily due to a decrease in equity earnings from
Marina I of $519,000, a decrease in gains on the sale of investment land of
$458,000, and a decrease in homesite sales less related direct costs of
$392,000.
Earnings from homesite sales were $2,008,000 in 1996, which compares to
$2,004,000 in 1995. There was an increase in net earnings per homesite sale in
1996 as a result of the sale of a premier homesite on the peninsula in
Bridgewater, and the sale of a home in Cambridge that the Partnership had used
as a sales office. In the fourth quarter of 1996, the Partnership reversed four
homesite sales as a result of two insolvent builders.
The Partnership recognized $461,000 as its share of the earnings from
Marina I in 1996, compared to $980,000 in 1995. Such decrease is the result of a
decrease in homesite sales to $1,364,000 in 1996 as compared to $2,947,000 in
1995.
During 1996, the Partnership sold commercial property held for investment
at Geist Crossing for a gain of $40,000, compared to a gain in 1995 of $498,000.
General and administrative expenses increased by $117,000 in 1996 compared
to 1995. This increase primarily results from an increase in salaries and wages
of $53,000, an increase of legal fees of $29,000
On April 18, 1996, the Partnership made a cash distribution to the partners
of record on April 4, 1996, of $3.25 per unit of partnership interest, for a
total of $2,194,000. This compares to a cash distribution of $2.00 per
partnership unit on April 17,1995.
<PAGE>
From time to time, the Partnership may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Partnership notes that a variety of factors could cause the Partnership's actual
results and experiences to differ materially from the anticipated results or
other expectations expressed in the Partnership's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Partnership's business include the following: (i)
the risk of adverse changes in the future level of demand for real estate by the
Partnership's customers and prospective customers caused by regional or real
estate-specific economic downturns, (ii) the potential for adverse changes in
federal income tax laws or regulations that might prevent the Partnership from
continuing to be taxed as a partnership for income tax purposes, and (iii) other
risks detailed from time to time in the Partnership's filings with the
Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following are the financial statements of the Partnership and The
Marina I L.P. for the years ended December 31, 1997, 1996, and 1995, and the
independent auditors' reports thereon. A list of the reports and financial
statements appears in response to Item 14 of this report.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Partners
The Marina Limited Partnership:
We have audited the accompanying balance sheets of The Marina Limited
Partnership as of December 31, 1997 and 1996, and the related statements of
earnings, partners' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Marina Limited Partnership
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 13, 1998
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1997 and 1996
<TABLE>
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 5,531,556 4,591,103
Investment in U.S. Treasury note - 996,875
Receivables from homesite sales 1,468,895 1,460,990
Other receivables and assets 519,445 612,229
Properties held for sale:
Homesites available for sale 1,864,770 2,107,566
Homes available for sale 1,743,092 -
Land and land improvements (note 3) 735,678 1,537,940
------------ -----------
11,863,436 11,306,703
------------ -----------
Property and equipment (note 2):
Marine property and equipment, net 2,630,222 2,080,772
Recreational facilities, net 508,001 362,461
Commercial properties, net 2,472,045 2,562,076
----------- -----------
5,610,268 5,005,309
----------- -----------
Other investments (note 4):
Marina I 2,404,228 1,931,943
Dockside Cafe 139,119 205,651
Flatfork Creek Utility 20,482 -
------------ ----------
$ 20,037,533 18,449,606
============ ==========
Liabilities and Partners' Equity
Accounts payable 590,865 518,651
Accrued bonuses 66,666 56,305
Deferred revenues and sale deposits 202,195 137,223
Amount payable to Flatfork Creek Utility (note 1) - 107,778
------------ ------------
Total liabilities 859,726 819,957
------------ ------------
Partners' equity:
General partner - 201,188 units 5,731,363 5,270,017
Limited partners - 473,947 units 13,446,444 12,359,632
---------- ----------
Total partners' equity 19,177,807 17,629,649
---------- ----------
$ 20,037,533 18,449,606
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Earnings
Years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Homesite sales $ 2,733,459 3,386,508 4,992,000
Marine operations 3,790,502 3,156,123 3,064,744
Equity in earnings of investee companies (note 4) 992,234 386,089 919,835
Interest income445,628 428,338 398,497
Rental income, net (note 6) 210,660 202,504 127,231
Recreational facilities, net 69,033 91,754 76,681
Gain on sales of land held for investment (note 3) 661,164 39,981 498,373
---------- ----------- ------------
8,902,680 7,691,297 10,077,361
---------- ----------- ------------
Costs and expenses:
Cost of homesites sold and related expenses 1,365,040 1,378,868 2,591,991
Marine operations 2,677,554 2,282,929 2,225,179
General and administrative 1,036,074 919,277 802,335
Management fees paid to general partner (note 1) 81,665 76,515 66,420
----------- ----------- -------------
5,160,333 4,657,589 5,685,925
----------- ----------- -------------
Net earnings 3,742,347 3,033,708 4,391,436
Net earnings attributable to general partner 1,115,207 894,471 1,279,532
--------- ---------- -----------
Net earnings attributable to limited partners $ 2,627,140 2,139,237 3,111,904
========= ========= ===========
Weighted average number of limited
partner units outstanding 473,947 476,184 478,421
========== ========== ============
Net earnings per limited partner unit $ 5.54 4.49 6.50
========== ========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Partners' Equity
Years ended December 31, 1997, 1996 and 1995
<TABLE>
General Limited Total
partner's partners' partners'
equity equity equity
------ ------ ------
<S> <C> <C> <C>
Balance December 31, 1994 $ 4,021,726 9,722,724 13,744,450
Distributions to partners ($2.00 per unit) (393,428) (956,842) (1,350,270)
Net earnings 1,279,532 3,111,904 4,391,436
--------- ----------- -----------
Balance December 31, 1995 4,907,830 11,877,786 16,785,616
Distributions to partners ($3.25 per unit) (639,321) (1,554,868) (2,194,189)
Exchange of 4,474 units, net 105,721 (105,721) -
Utility refunds 1,316 3,198 4,514
Net earnings 894,471 2,139,237 3,033,708
---------- ----------- -----------
Balance December 31, 1996 5,270,017 12,359,632 17,629,649
Distributions to partners ($3.25 per unit) (653,861) (1,540,328) (2,194,189)
Net earnings 1,115,207 2,627,140 3,742,347
--------- ----------- -----------
Balance December 31, 1997 $ 5,731,363 13,446,444 19,177,807
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,742,347 3,033,708 4,391,436
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of properties 403,757 384,128 279,747
Equity in earnings of investee companies (992,234) (386,089) (919,835)
Receivables on current year=s homesite sales (723,283) (586,949) (1,680,536)
Collection of prior years= homesite sales 715,378 1,054,228 539,734
Gain on sales of land held for investment (661,164) (39,981) (498,373)
Homes and homesite development costs (1,727,510) (1,164,570) (2,537,941)
Cost of homesites sold 500,253 1,001,458 2,221,466
Change in operating assets and liabilities 132,553 (122,307) 297,444
---------- ---------- ----------
Net cash provided by operating activities 1,390,097 3,173,626 2,093,142
--------- --------- ---------
Cash flows from investing activities:
Distributions received from Marina I 499,467 397,630 810,200
Distributions received from Dockside Cafe 66,532 37,324 46,000
Additions to marine property and equipment (753,541) (189,402) (688,621)
Additions to recreational facilities (174,788) (8,295) (432,653)
Additions to commercial properties (80,387) (207,534) (1,121,341)
Land and land development costs (11,127) (777,770) (593,132)
Proceeds from sales of land held for investment 1,201,514 44,250 2,278,000
Maturity (purchase) of U.S. Treasury note 996,875 (996,875) -
---------- ---------- ---------
Net cash provided (used) by investing activities 1,744,545 (1,700,672) 298,453
--------- --------- ----------
Cash flows from financing activities:
Distributions to partners (2,194,189) (2,194,189) (1,350,270)
Utility refunds received - 4,514 -
---------- ---------- ---------
Net cash used by financing activities (2,194,189) (2,189,675) (1,350,270)
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 940,453 (716,721) 1,041,325
Cash and cash equivalents at beginning of year 4,591,103 5,307,824 4,266,499
--------- --------- ---------
Cash and cash equivalents at end of year $ 5,531,556 4,591,103 5,307,824
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
General
The Marina Limited Partnership became a publicly traded limited partnership
on December 30, 1986, and the limited partnership units are registered
securities and currently represent approximately 70 percent of the total
Partnership units (62 percent after the conversion of 56,764 units into
shares of common stock of the general partner in 1998). The remaining units
are owned by Marina II Corporation, the general partner, which has the
authority to manage the affairs of the Partnership. The economic interests
in the Partnership represented by general partner units and limited partner
units are identical. The general partner receives management fees equal to
three percent of the Partnership's gross margin on marine operations,
rental income and recreational facilities.
As a partnership, the allocated share of the Partnership=s taxable income
is includable in the income tax returns of the partners; accordingly,
income taxes are not reflected in the Partnership's financial statements.
The tax basis of assets and liabilities exceeds the book basis by $441,000
at December 31, 1997. In order to continue partnership tax treatment, it
was necessary for the Partnership to restrict public trading of the limited
partner units, and as of December 20, 1997, limited partner units are no
longer traded on NASDAQ. Buyers and sellers are required to contact the
Partnership to follow a prescribed process to buy or sell units.
The majority of the Partnership=s activities and operations are located in
the Geist Lake area northeast of Indianapolis, Indiana and in the Morse
Lake area north of Indianapolis. Its primary activities are the development
of homes and homesites for sale and marine operations at Geist and Morse
Lakes.
Cash and Cash Equivalents
Cash and cash equivalents include cash balances, money market investments
with maturities of less than three months, and U.S. Treasury bills with
maturities of less than twelve months.
The Partnership maintains a separate trustee accounting of unclaimed
limited partner unit distributions.
Properties Held for Sale
Properties held for sale are carried at the lower of cost or estimated fair
value less costs to sell. Costs include construction, excavation,
engineering and other direct costs incurred to bring land to a
fully-improved saleable condition. Land and land improvement costs are
allocated to land sales and homesite projects using the relative sales
value and the specific identification methods. Properties are classified as
available for sale when marketing of the properties for sale is authorized
by management.
<PAGE>
In 1997, the Partnership began a homebuilding division with the acquisition
of the assets of Chesapeake Building Corporation for a cash payment of
$175,000. The former owner of Chesapeake is related to the president of the
general partner. Homes are being built on land development sites owned by
the Partnership and the Marina I L.P.
Sales of residential homesites are for cash, on builder contract, or with
purchase money mortgages. Sales which satisfy a down-payment requirement of
10% of the purchase price are recorded as revenue at the time of closing.
Receivables from homesite sales are payable over seven years with interest
at 9% the first year, 10% the second year and 12% thereafter. The portion
of the sales price which may be refundable under builder programs is
deferred until the refund period expires. Land sales are generally for
cash. Costs of properties sold are determined by the relative sales value
of the property to the total project.
At the time a homesite is sold, the Partnership accrues a fee payable to
Flatfork Creek Utility, Inc. for the cost of certain utility hook-up
charges which is included in the cost of the homesite sold.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
The recreational facilities are adjacent to homesite developments at Geist
Lake for which residents of the developments pay a fee for the use of the
facilities. Commercial properties represent developed restaurant and other
retail properties which are generally leased under short-term arrangements.
Depreciation is computed using the straight-line method based on the
estimated useful lives of the assets. Maintenance and repairs are expensed
as incurred while major additions and improvements are capitalized. Since
the recreational facilities and retail properties are only incidental minor
operations, the results are shown on a net basis in the statements of
earnings.
Other Investments
The equity method is used to account for the Partnership=s 50% general
partner investment in The Marina I L.P. (Marina I), its 40% limited partner
investment in Dockside Cafe, L.P., and its 50% corporate investment in
Flatfork Creek Utility, Inc. The Partnership's share of the net earnings
and losses of these businesses is included currently in earnings.
Utility Refunds
When the Partnership's predecessor was formed in April 1982, it acquired
rights under utility refund agreements which were not recorded at that time
as future receipts could not be estimated. As such, utility refunds related
to that period are recorded as capital contributions when received.
<PAGE>
Rental Income
All leases are classified as operating leases, and minimum rents are
recognized monthly based on the terms of the lease. Percentage rents are
recognized monthly based on reported sales.
Financial Instruments
The carrying amounts of the receivables approximate their fair value as the
interest rates are consistent with market rates. The carrying amounts of
all other financial instruments approximate fair value because of the
short-term maturity of these items.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures 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.
The Partnership evaluates all of its real estate investments periodically
to assess whether any impairment is present, including recurring operating
losses and significant adverse changes in legal factors or business climate
that affect the recovery of recorded value. If any real estate investment
is considered impaired, a loss is provided to reduce the carrying value of
the property to its estimated fair value.
(2) Property and Equipment
Property and equipment principally consisting of land, land improvements,
marine and retail facilities, boat docks, and equipment used in the marine
operations located on Morse and Geist Lakes are summarized following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Land and land improvements $ 1,209,047 1,209,047
Buildings and equipment 7,848,440 6,853,757
--------- ---------
9,057,487 8,062,804
Accumulated depreciation 3,447,219 3,057,495
--------- ---------
$ 5,610,268 5,005,309
========= =========
</TABLE>
<PAGE>
(3) Land and Land Improvements
At December 31, land and land improvements consisted of the following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Unimproved land and residential land
under development $ 620,158 945,372
Commercial sites 115,520 592,568
------- ----------
$ 735,678 1,537,940
======= =========
</TABLE>
<PAGE>
The Partnership sold commercial and a 13 acre parcel of farm land in 1997,
to unrelated parties for cash resulting in revenues and gains as follows:
1997 1996 1995
---- ---- ----
Revenue $ 1,307,055 44,250 2,278,000
Gain 661,164 39,981 498,373
(4) Other Investments
Marina I
The Partnership is a general partner with Irving Materials, Inc. as limited
partner in Marina I which develops homesites and other land near Geist
Lake. The Partnership=s equity in the earnings of Marina I amounted to
$961,813 in 1997, $461,405 in 1996, and $979,957 in 1995.
The following is a summary of balance sheet and operating information (in
thousands) of Marina I as of December 31, 1997 and 1996 and for the years
then ended:
1997 1996
---- ----
Cash and cash equivalents $ 553 847
Homes and homesites available for sale
and land and land improvements 3,719 3,071
Receivables from homesite sales 652 289
Other assets 407 3
Liabilities (222) (145)
------ ------
Partners' equity $ 5,109 4,065
===== =====
Homesite sales and other revenues 3,156 1,444
Cost of homesites sold and expenses 1,311 579
----- -----
Net earnings $ 1,845 865
===== ======
The Partnership pays various operational costs incurred for Marina I, which
are reimbursed at actual or allocated amounts.
Dockside Cafe
The Partnership is a limited partner with Dockside Cafe, Inc. as general
partner for the operation of restaurants at the Geist and Morse Lake
marinas. The Partnership constructed the restaurants and leases them to
Dockside Cafe, L.P.
<PAGE>
Flatfork Creek Utility, Inc.
In 1990, the Partnership acquired property to construct a wastewater
treatment plant to serve homesites to be developed in the Geist Lake area
by the Partnership, Marina I and other developers. In 1993, Flatfork Creek
Utility, Inc. (the Corporation) was formed to complete the construction of,
and then operate, the wastewater water treatment plant (the Utility). The
Partnership transferred $738,000 of assets and $424,000 of liabilities
related to the Utility to the Corporation, as its sole shareholder. The
Partnership then sold 50% of its interest in the Corporation to Irving
Materials, Inc. for $157,000. The wastewater treatment plant became
operational in November 1994. The Corporation is subject to regulation by
the Indiana Utility Regulatory Commission.
To date, the Corporation's only customers are the Partnership, Marina I and
the resident homeowners of homesites developed by the Partnership and
Marina I. In January 1997, the Partnership and Marina I paid $196,812 and
$590,436, respectively, as advance payments for future utility hook-ups.
The Partnership recognized income of $20,482 in 1997 and a loss of $93,000
in 1996 as its share of the Corporation=s results of operations.
The Partnership, along with Irving Materials, Inc., are both guarantors of
the Corporation's $2,500,000 loan, of which $1,566,954 was outstanding at
December 31, 1997.
(5) Notes Payable to Bank
The Partnership has a $2,000,000 unsecured line of credit which matures
July 1, 1998 and bears interest at the bank=s prime rate. There were no
borrowings on the line of credit through December 31, 1997.
(6) Rental Income
The restaurant facility at the Geist Lake Marina is leased to Dockside
Cafe, L.P. under an operating lease with monthly minimum rentals of $7,500
plus a percentage of sales over stated bases. Overage rents of $69,600,
$90,000 and $94,200 for 1997, 1996 and 1995 sales, respectively, are
included in rental income.
The restaurant facility at Morse Lake Marina is also leased to Dockside
Cafe, L.P. under an operating lease with monthly minimum rentals of $5,000
plus a percentage of sales over stated bases. No overage rents were due for
1997, 1996 or 1995.
During 1995, the Partnership began operating a 20,000 square foot retail
and office development known as Marina Village. Included in rental income
is $210,600, $149,700 and $29,900 for 1997, 1996 and 1995, respectively,
from the retail tenants. At December 31, 1997, occupancy was 100% including
2,000 square feet which is the office of the Partnership. In addition to
minimum rent, the leases require reimbursements of specified operational
expenses.
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
The Partnership also leases certain real estate under short-term operating
leases for which rental income amounted to $15,200, $6,200 and $16,900 in
1997, 1996 and 1995, respectively.
The minimum rent payments due under operating leases in effect at December
31, 1997 are summarized as follows:
Marina
Restaurants Village Total
----------- ------- -----
1998 $ 149,400 238,900 388,300
1999 149,400 245,100 394,500
2000 149,400 207,600 357,000
2001 12,500 72,100 84,600
2002 - 42,800 42,800
--------- -------- ---------
$ 460,700 806,500 1,267,200
========= ======= =========
(7) Segment Information
The Partnership is engaged in two primary business segments, the
development and sale of homes and homesites and marine operations at Geist
and Morse Lakes. Summarized financial information by business segment for
1997, 1996 and 1995 is as follows (in thousands):
1997 1996 1995
---- ---- ----
Revenues:
Homesite sales $ 2,733 3,387 4,992
Equity in earnings of
homesite investee company 962 461 980
Marine operations 3,791 3,156 3,065
Other 1,417 687 1,040
----- ------ ------
$ 8,903 7,691 10,077
===== ===== ======
Operating income:
Homesite sales, including
equity in earnings
of homesite investee company 2,330 2,469 3,380
Marine operations 1,113 873 840
Other 1,417 688 1,040
Administration (1,118) (996) (869)
----- ------ ------
$ 3,742 3,034 4,391
===== ===== =======
Depreciation expenses:
Homesite sales 17 4 2
Marine operations 171 163 142
Other 216 217 136
----- ----- ---
$ 404 384 280
====== ===== ===
<PAGE>
THE MARINA I L. P.
Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Partners
The Marina I L. P.:
We have audited the accompanying balance sheets of The Marina I L. P. as of
December 31, 1997 and 1996, and the related statements of earnings, partners'
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Marina I L. P. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 13, 1998
<PAGE>
THE MARINA I L. P.
Balance Sheets
December 31, 1997 and 1996
<TABLE>
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 553,361 847,197
Receivables from homesite sales 651,656 288,756
Other receivables and assets 18,238 3,452
Prepaid hook-up fees to Flatfork Creek Utility 388,930 -
Homes and homesites available for sale 2,623,338 2,020,953
Land and land improvements 1,095,715 1,049,568
--------- ---------
$ 5,331,238 4,209,926
========= =========
Liabilities and Partners' Equity
Accounts payable and accrued expenses 60,470 39,426
Deferred revenues and sale deposits 62,500 20,000
Accounts payable to affiliates 99,017 85,200
--------- ----------
Total liabilities 221,987 144,626
--------- ----------
Partners' equity:
General partner 2,351,124 1,884,443
Limited partner 2,758,127 2,180,857
Total partners' equity 5,109,251 4,065,300
--------- ---------
$ 5,331,238 4,209,926
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA I L. P.
Statements of Earnings
Years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Homesite sales $ 3,056,941 1,363,884 2,946,813
Interest income 99,242 80,069 88,530
--------- --------- ---------
3,156,183 1,443,953 3,035,343
--------- --------- ---------
Costs and expenses:
Cost of homesites sold and related expenses 1,281,591 569,181 1,133,518
General and administrative 29,964 9,599 1,976
--------- --------- ---------
1,311,555 578,780 1,135,494
--------- --------- ---------
Net earnings 1,844,628 865,173 1,899,849
Net earnings attributable to general partner 961,813 461,405 979,957
---------- --------- ---------
Net earnings attributable to limited partner $ 882,815 403,768 919,892
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA I L. P.
Statements of Partners' Equity
Years ended December 31, 1997, 1996 and 1995
<TABLE>
General Limited Total
partner's partner's partners'
equity equity equity
------ ------ ------
<S> <C> <C> <C>
Balance December 31, 1994 $ 1,650,911 1,806,377 3,457,288
Distributions to partners (810,200) (789,800) (1,600,000)
Land contributed by partners - 134,961 134,961
Net earnings 979,957 919,892 1,899,849
---------- ---------- ---------
Balance December 31, 1995 1,820,668 2,071,430 3,892,098
Distributions to partners (397,630) (452,370) (850,000)
Land contributed by partners - 158,029 158,029
Net earnings 461,405 403,768 865,173
---------- ---------- ----------
Balance December 31, 1996 1,884,443 2,180,857 4,065,300
Distributions to partners (495,132) (429,131) (924,263)
Land contributed by partners - 123,586 123,586
Net earnings 961,813 882,815 1,844,628
---------- ---------- ---------
Balance December 31, 1997 $ 2,351,124 2,758,127 5,109,251
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA I L. P.
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,844,628 865,173 1,899,849
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Receivables on current year=s homesite sales (551,962) (125,415) (448,877)
Collection on prior years= homesite sales 189,062 489,198 351,398
Homes and homesites development costs (511,423) (361,520) (394,447)
Cost of homesites sold 909,068 425,646 999,480
Change in operating assets and liabilities (326,355) 56,298 7,588
--------- --------- ---------
Net cash provided by operating activities 1,553,018 1,349,380 2,414,991
--------- --------- ---------
Cash flows from investing activities:
Land and land development costs (922,591) (492,403) (32,699)
--------- --------- --------
Net cash used by investing activities (922,591) (492,403) (32,699)
--------- --------- --------
Cash flows from financing activities:
Distributions to partners (924,263) (850,000) (1,600,000)
-------- -------- ---------
Net cash used by financing activities (924,263) (850,000) (1,600,000)
-------- -------- ---------
Net increase (decrease) in cash
and cash equivalents (293,836) 6,977 782,292
Cash and cash equivalents at beginning of year 847,197 840,220 57,928
---------- --------- ---------
Cash and cash equivalents at end of year $ 553,361 847,197 840,220
========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MARINA I LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
Summary of Significant Accounting Policies
General
The Marina I L. P. (Marina I) was formed by The Marina Limited Partnership
(TMLP) and Irving Materials, Inc. (Irving) to develop residential homesite land
near Geist Lake northeast of Indianapolis, Indiana. Marina I is managed by
Marina II, the general partner of TMLP. Certain expenses and costs incurred by
Marina I are paid by TMLP and then reimbursed by Marina I based on actual or
allocated amounts.
Contributions of land by Irving, the limited partner, are valued at amounts
agreed upon by the partners which approximate the partners= tax basis in the
land. Earnings and distributions are allocated as follows:
For earnings from homesite sales on land contributed by Irving, Irving is
first allocated an amount equal to 20% of the gross sales price less its
tax basis in the land contributed, and TMLP is allocated 5% of the gross
sales price. Any remaining earnings are allocated 40% to Irving and 60% to
TMLP.
For earnings from all other homesite sales, TMLP is first allocated a
Amanagement fee@ based on profits from the homesite sales, with the
remainder allocated 50% to each partner.
Cash and Cash Equivalents
Cash and cash equivalents include cash balances and money market investments
with maturities of less than three months.
Homes and Homesites Available for Sale
Properties available for sale are carried at the lower of cost or estimated fair
value less costs to sell. Properties are classified as available for sale when
marketing of the properties for sale is authorized by management.
Sales of residential homesites are for cash, on builder contract, or purchase
money mortgages. Sales which satisfy a down-payment requirement of 10% of the
purchase price are recorded as revenue at the time of closing. Receivables from
homesite sales are payable over seven years with interest at 9% the first year,
10% the second and 12% thereafter. The portion of the sales price which may be
refundable under builder programs is deferred until the refund period expires.
Costs of homesites sold are determined by the relative sales value of the
homesite to the total project.
<PAGE>
THE MARINA I L. P.
Notes to Financial Statements
At the time a lot is sold, the Partnership accrues a fee payable to Flatfork
Creek Utility, Inc. (whose partners are also TMLP and Irving) for the cost of
certain utility hook-up charges which is included in cost of homesites sold. In
January 1997, Marina I paid $590,436 to Flatfork Creek Utility, Inc. as advance
payments for future utility hook-ups.
Land and Land Improvements
Costs include construction, excavation, engineering and other direct costs
incurred to bring land to a fully-improved saleable condition. These costs are
allocated to homesite sales using the relative sales value and the specific
identification methods.
Financial Instruments
The carrying amounts of the receivables approximate their fair value because the
interest rates are at market rates. The carrying amounts of all other financial
instruments approximate fair value because of the short-term maturity of these
items.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures 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.
The Partnership evaluates all of its real estate investments periodically to
assess whether any impairment indications are present, including significant
adverse changes in legal factors or business climate that affect the recovery of
recorded value. If any real estate investment is considered impaired, a loss is
provided to reduce the carrying value of the property to its estimated fair
value.
Income Taxes
As a partnership, the allocated share of the taxable income of Marina I is
includable in the income tax returns of the partners; accordingly, income taxes
are not reflected in these financial statements.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in the Partnership's independent certified public
accountants within 24 months prior to, or subsequent to, the date of the most
recent financial statements, nor has there been any disagreements with the
accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The following table presents certain information regarding the Directors
and executive officers of the General Partner. Each person listed is a Director
of the General Partner except for the Treasurer. Messrs. Rosenberg, Rosenberg II
and Calabria are the executive officers of the General Partner. Unless otherwise
indicated in a footnote, the principal occupation of each Director or executive
officer has been the same for the last five years.
Year of
Name Principal Occupation Birth
---- -------------------- -----
Patrick J. Bruggeman President, American Steel 1948
Investment Corporation, Ft.
Wayne, Indiana (manufacturer
of wire rope)
Lawrence L. Buell Certified Public Accountant and 1934
Member, Indiana House
of Representatives (1)
Stanley E. Hunt Retired (2) 1930
Allen E. Rosenberg President of the General Partner (3) 1935
Allen E. Rosenberg II Vice President and Assistant 1955
Treasurer of the General Partner (4)
Donald J. Calabria Vice President, Treasurer, and 1939
Secretary of the General Partner (5)
1. Mr. Buell was Executive Director of the Health and Hospital Corporation of
Marion County from January 1984 to February 1994 and its Treasurer from
February 1994 to January 1995.
2. Mr. Hunt was President of The Shorewood Corporation from 1977 through
December 1994.
3. Mr. Rosenberg became President of the General Partner in 1982 and held the
position of Treasurer from 1984 to June 1989.
4. Mr. Rosenberg II became Assistant Treasurer of the Company in 1987 and Vice
President and a Director in 1997.
5. Mr. Calabria became Vice President & CFO, Treasurer and Secretary of the
General Partner in June 1997. He had been Vice President and CFO of Natare
Corp from 1992 to 1995 and Treasurer and CFO of The Beta Group from 1995 to
1996.
<PAGE>
All Directors serve annual terms until their successors are elected and
have qualified. The Directors are elected by the shareholders of the General
Partner. Mr. Rosenberg has served as a Director of the Company or General
Partner since 1982. Mr. Hunt was elected as a Director in 1996 and Mr. Rosenberg
II in 1997. All other Directors were elected in 1984. All officers serve at the
pleasure of the Board of Directors. Mr. Rosenberg is the father of Mr. Rosenberg
II. There are no other family relationship between any of the executive officers
and Directors of the General Partner.
ITEM 11. EXECUTIVE COMPENSATION.
Compensation of Executive Officers
The following table sets forth aggregate compensation for each of the
Partnership's executive officers whose total annual salary and bonus exceed
$100,000, for services rendered to the Partnership in all capacities during the
years ended December 31, 1997, 1996, and 1995.
SUMMARY COMPENSATION TABLE
Name and
Principal Position Year Salary Bonus
- ------------------ ---- ------ -----
Allen E. Rosenberg
President, 1997 $200,000 $180,667
Director of the 1996 199,653 187,992
General Partner 1995 174,462 202,525
Allen E. Rosenberg II
Vice President, 1997 $ 86,353 $103,206
Assistant Treasurer and 1996 18,000 55,000
Director of the 1995 18,000 19,681
General Partner
Each Director except Messrs. Rosenberg and Rosenberg II receives a fee of $5,000
per year, plus $750 for each Board of Directors or Committee meeting attended.
If, however, more than one meeting is held on the same day, a fee of $150 is
paid for the subsequent meetings.
<PAGE>
Bonus Plans
Allen E. Rosenberg is compensated under a plan whereby three percent of the
proceeds or other revenues from sales of the Partnership's investment land have
been paid to him for his stewardship of the Partnership's land. The following
payments were made pursuant to that plan:
Year Amount
---- -------
1997 $ 39,211
1996 $ 1,328
1995 $ 68,340
In addition, five percent of the gross profit (net of development and
selling costs) on the Partnership's individual homesite sales and five percent
of the Partnership's share of the income from The Marina I L.P. are paid to Mr.
Rosenberg. The following payments were made pursuant to that plan:
Year Amount
---- -------
1997 $ 141,455
1996 $ 186,664
1995 $ 134,185
Allen E. Rosenberg II is compensated under a plan whereby 12 percent of the
profit (before general and administrative expenses) will be paid to him for each
residence built and sold at Sail Place. In addition, Mr. Rosenberg II will
receive 50% of the net profit (before general and administrative expenses) on
each custom home sold. Under this plan, $75,000 was paid to Mr. Rosenberg II as
the minimum amount payable under the plan. The minimum bonus payable in 1998
will be $100,000. In January 1997, $28,206 was paid to Mr. Rosenberg II as a
discretionary bonus for construction completed in 1996 on behalf of the
Partnership.
Management Fees Paid to the General Partner
In addition to bonuses that may be paid from the proceeds of sales of the
Partnership's land or other revenues (see " Bonus Plans" above), the General
Partner is permitted to receive management fees from the Partnership. The
General Partner received management fees of $82,000 in 1997, which is equal to
three percent of the Partnership's gross margin on marine operations,
recreational facilities, and rental income. The management fee is not paid on
revenues from land sales and investment income.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Security Ownership
The following table sets forth the number of Limited Partner Units of the
Partnership beneficially owned by all Directors of the General Partner and by
all Directors and officers of the General Partner as a group as of March 23,
1998.
Number of Percent
Limited Partner Units of
Name Beneficially Owned Class
---- ------------------ -----
Patrick J. Bruggeman 9,300 2.2%
Allen E. Rosenberg 4,937 (1) 1.2%
Allen E. Rosenberg II 1,665 (2) 0.4%
Stanley E. Hunt 1,000 0.2%
All Directors and Officers
of the General Partner
as a group (6 persons) 16,902 (3) 4.1%
1. Includes 4,937 Units owned by Mr. Rosenberg's wife.
2. Includes 1,665 Units owned by Mr. Rosenberg II's Children.
3. Includes 6,602 Units owned by spouses or others. Also includes Units
described in the above notes.
The Partnership has concluded that Limited Partner Units do not constitute
voting securities. Therefore, the Partnership does not report information on the
number of Limited Partner Units beneficially owned by persons owning more than
five percent of the Limited Partner Units.
Upon the reorganization of the Company into the Partnership in 1986, five
of the seven members of the Board of Directors of the Company (the "Continuing
Directors") received all the General Partner Units in the Partnership. See
"General" under Item 1. The Partnership disclaims that the General Partner Units
are securities. General Partner Units are vested with authority to manage the
affairs of the Partnership. In exchange for the General Partner Units that they
received in the reorganization, the Continuing Directors became the sole
shareholders of the General Partner.
<PAGE>
During 1997, The Board of Directors of the General Partner approved the
following transactions: (i) the gift by Mr. Rosenberg to his children, of shares
of the General Partner equilavent to 60,000 Partnership Units; (ii) the
acquisition of all of the shares of the General Partner, equilavent to 18,400
Partnership Units, owned by John Wooling, one of the Continuing Directors, by
Allen E. Rosenberg II; and (iii) the conversion of 54,000 Limited Partner Units
acquired in December 1997 by Mr. Rosenberg, and 2,764 Limited Partner Units
owned by Mr. Rosenberg II, into a like number of General Partner Units. The
Limited Partner Units were converted into General Partner Units in January 1998,
which decreased the number of Limited Partner Units by 56,764 units, to 417,183
units, and increased the number of General Partner Units by 56,764 to 257,952
units.
As of March 23, 1998 the General Partner owns a 38.2 percent interest in
the profits, losses, capital, and distributions of the Partnership, which
percentage is equal to the General Partner percentage of the Common Stock of the
Company owned directly by the Continuing Directors at the time the Company was
reorganized into the Partnership plus the net Limited Partner Units subsequently
acquired and converted into General Partner Units.
Three of the Continuing Directors, in addition to Mr. Hunt and Mr.
Rosenberg II, are the current members of Board of Directors of the General
Partner. The Directors of the General Partner manage and control the overall
business and affairs of the General Partner and, consequently, those of the
Partnership. The Directors of the General Partner are elected by the
shareholders of the General Partner (unless there is a vacancy on the Board, in
which case the remaining Board members may fill the vacancy) without the
approval of the Limited Partners. Reflecting the additional conversion of
Limited Partner Units in January 1998 by Mr. Rosenberg and Mr. Rosenberg II,
ownership of the shares of the General Partner on March 23, 1998 is as set forth
in the following table:
Percentage
Shareholder Ownership
----------- ---------
Allen E. Rosenberg 47.9%
Patrick J. Bruggeman 17.2%
Allen E. Rosenberg II 16.0%
Stanley E. Hunt 2.6%
Lawrence Buell .8%
Other children of 15.5%
Mr. Rosenberg
Upon the withdrawal or removal of a General Partner, its participation in
the General Partner Units will cease. Thereafter, the General Partner Units
owned by the withdrawn or removed General Partner will change to Limited Partner
Units.
<PAGE>
Changes in Control
The Shareholders' Agreement (the "Shareholders' Agreement") dated December
2, 1986, among the shareholders of the General Partner, prescribes certain
procedures for the sale or other transfer of shares of the General Partner and
for the voting of certain shares, the operation of which may at a subsequent
date result in a change of control of the General Partner and, consequently, a
change of control of the Partnership. The Shareholders' Agreement is attached as
an exhibit to the Partnership's 1993 Annual Report on Form 10-K, which is
incorporated herein by this reference. The Shareholders' Agreement provides
certain restrictions on transfer, rights of first refusal, and options to
purchase with respect to shares of the General Partner. The Shareholders'
Agreement also provides certain voting arrangements in the event of the death or
disability of Allen E. Rosenberg, the majority shareholder of the General
Partner.
The following is a brief summary of the Shareholders' Agreement. This
summary is not intended to be complete and is qualified in all respects by the
more detailed provisions of the Shareholders' Agreement.
In general, the Shareholders' Agreement provides that a shareholder may
transfer all or part of his shares of the General Partner to a party who is not
a party to the Shareholders' Agreement only upon prior written approval by the
General Partner and subject to any limitations that may be imposed by the
General Partner. If, for any reason, a shareholder who is also a Director,
ceases to be a Director of the General Partner, the shareholder and his heirs,
executors, administrators, successors, or assigns, subject to the rights of
first refusal described below, has the right, but not the obligation, upon
surrender of all of his shares of the General Partner, to cause the General
Partner to (a) convert that portion of the General Partner Units attributable to
all of such shareholder's shares into Limited Partner Units on the basis of one
Limited Partner Unit for one General Partner Unit, (b) distribute such Limited
Partner Units to the shareholder, and (c) cause the Partnership to register such
Limited Partner Units under the Securities Act of 1933, as amended. Prior to
such conversion of General Partner Units into Limited Partner Units, the shares
of the General Partner the shareholder proposes to surrender in exchange for
Limited Partner Units must first be offered to the remaining parties to the
Shareholders' Agreement and the General Partner as provided in the Shareholders'
Agreement. The exercise of any such rights of first refusal is contingent upon
the exercise of rights of first refusal to purchase, in the aggregate, all
shares held by the selling shareholder.
<PAGE>
If a shareholder of the General Partner acquires, from time to time,
Limited Partner Units, such Units shall be, at the option of the General
Partner, changed to General Partner Units and contributed to the General Partner
in return for additional shares of stock of the General Partner.
The Shareholders' Agreement also provides that, in the event of the death
or disability of Allen E. Rosenberg, the majority shareholder of the General
Partner, his shares of the General Partner will be voted by a committee
consisting of four members, at least one of whom shall be a Director of the
General Partner. The members of the voting committee are Stanley E. Hunt, David
M. Manischewitz, Allen E. Rosenberg II, and John L. Woolling. Vacancies on the
voting committee will be filled by Allen E. Rosenberg, or, in the event of his
death or disability, by a majority of the remaining members of the voting
committee.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Chesapeake Building Corporation, which was owned by Allen E. Rosenberg II,
who is Vice President and Assistant Treasurer of the Partnership and the son of
Allen E. Rosenberg, President of the General Partner, sold all of its assets to
the Partnership in 1997 for the cash price of $175,000. Such transaction was
approved by The Board of Directors of the General Partner.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) (1) Financial Statements:
The following financial statements of the Partnership and The Marina I L.P.
appear in Part II, Item 8.
Independent Auditors' Report.
Balance Sheets -- December 31, 1997 and 1996.
Statements of Earnings -- Years Ended December 31, 1997, 1996, and 1995.
Statements of Partners' Equity -- Years Ended December 31, 1997, 1996 and
1995.
Statements of Cash Flows -- Years Ended December 31, 1997, 1996 and 1995.
Notes to Financial Statements.
(a)(2) Financial Statement Schedules:
All schedules for which provision is made in the applicable regulations of
the Commission have been omitted as the schedules are not required under the
related instructions, or the required information is inapplicable, or the
information is set forth in the financial statements included elsewhere herein.
(a)(3) Exhibits:
The exhibits filed as a part of this Annual Report on Form 10-K, all of
which are hereby incorporated by reference except financial statements and
schedules and Exhibits 3.1, 3.2, 4.1 and 99.3, are:
Exhibit Page No. or
Number Exhibit Filed With
- ------- --------- ----------
3.1 Certificate of Limited Partnership of (3)
The Marina Limited Partnership
3.2 Agreement of Limited Partnership of (3)
The Marina Limited Partnership
4.1 Agreement of Limited Partnership of (3)
The Marina Limited Partnership defining
the rights of security holders is filed
as Exhibit 3.2
<PAGE>
10.1 License Agreement, dated October 19, 1970, (2)
between Indianapolis Water Company and
The Shorewood Corporation
10.2 Conveyances of Easement Rights for the (2)
purpose of Installing and Maintaining
Boat Docks, dated June 30, 1982,
executed by the Shorewood Corporation
in favor of The Creek Land Company, Inc.
10.3 Consent to Assignment of License Rights, (2)
dated March 11, 1983, between Indianapolis
Water Company, The Shorewood Corporation
and The Creek Land Company, Inc.
27 Financial Data Schedule
99.1 Restated Articles of Incorporation of (1)
The Marina II Corporation
99.2 Restated Bylaws of The Marina II Corporation (1)
99.3 Shareholders' Agreement (3)
1. Registration Statement on Form S-4 (Reg. No. 33-9367) filed by The Marina
Limited Partnership on October 8, 1986.
2. Registration Statement on Form S-14 (Reg. No. 2-03600) filed by The Marina
Corporation on October 3, 1984, as amended on November 13, 1984, and
November 20, 1984.
3. Annual Report on Form 10-K filed by The Marina Limited Partnership for 1993.
(b) Reports on Form 8-K. No reports on Form 8-K were filed in the fourth
quarter of 1997 by the Partnership.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
The Marina Limited Partnership
Date: March 23, 1998 By: /s/ Allen E. Rosenberg
Allen E. Rosenberg,
President of The Marina
II Corporation, the General
Partner of The Marina
Limited Partnership
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report had been signed below by the following persons on behalf of the
Partnership and in the capacities and on the dates indicated.
Capacity With
Signature the General Partner Date
-------- ------------------- ----
/s/ Patrick J. Bruggeman Director March 23, 1998
Patrick J. Bruggeman
/s/ Lawrence L. Buell Director March 23, 1998
Lawrence L. Buell
/s/ Stanley E. Hunt Director March 23, 1998
Stanley E. Hunt
/s/ Allen E. Rosenberg Director and President March 23, 1998
Allen E. Rosenberg (Principal Executive
Officer)
/s/ Allen E. Rosenberg II Director, March 23, 1998
Allen E. Rosenberg II Vice President
and Secretary
/s/ Donald J. Calabria Vice President, March 23, 1998
Donald J. Calabria Treasurer,
and Secretary
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803605
<NAME> THE MARINA LIMITED PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,531,556
<SECURITIES> 0
<RECEIVABLES> 1,988,340
<ALLOWANCES> 0
<INVENTORY> 4,343,540
<CURRENT-ASSETS> 0
<PP&E> 5,610,268
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,037,533
<CURRENT-LIABILITIES> 859,726
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,177,807
<TOTAL-LIABILITY-AND-EQUITY> 20,037,533
<SALES> 6,523,961
<TOTAL-REVENUES> 8,902,680
<CGS> 4,042,594
<TOTAL-COSTS> 5,160,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,742,347
<EPS-PRIMARY> 5.54
<EPS-DILUTED> 5.54
</TABLE>
