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, 1998
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.( )
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 25, 1999, and assuming solely for
purposes of this calculation that all executive officers and Directors of the
registrant are affiliates, was approximately $13,127,000. The source of the bid
quotation is the matching service made available by the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>ii
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1 - Business 1
Item 2 - Properties 7
Item 3 - Legal Proceedings 8
Item 4 - Submission of Matters to a Vote of Security Holders 8
PART II
Item 5 - Market for Partnership's Common Equity
and Related Security Holder Matters 8
Item 6 - Selected Financial Data 10
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A - Quantitative and Qualitative Disclosures About
Market Risk 11
Item 8 - Financial Statements and Supplementary Data 14
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 33
PART III
Item 10 - Directors and Executive Officers 33
Item 11 - Executive Compensation 34
Item 12 - Security Ownership of Certain Beneficial Owners
and Management 36
Item 13 - Certain Relationships and Related Transactions 38
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 39
SIGNATURES 41
<PAGE>1
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.
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 are 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.
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.
Investment Real Estate
On December 31, 1998, the Partnership owned approximately 359 acres of
investment real estate. Approximately 277 acres of this investment real estate
are adjacent to Geist Lake, and approximately 82 acres are adjacent to Morse
Lake. Substantially all of the properties consist of partially wooded, gently
rolling land adjacent to the lakes. Homes and homesite sales revenue accounted
for 37 percent of the Partnership's revenues for 1998, 31 percent for 1997, and
44 percent for 1996. Gains on sale of investment land accounted for 4 percent of
the Partnership's revenues for 1998, 7 percent for 1997, and 1 percent for 1996.
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, 1998, the Partnership's investment real
estate at Geist Lake consisted of approximately 277 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, 1998, the Partnership's investment
properties at Morse Lake consisted of approximately 82 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 "Marine
Operations" below.
<PAGE>2
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 two waterfront
homesites from Bridgewater in 1998. Homesite revenue from these sales was
$270,000. Homesite inventory in Bridgewater at December 31, 1998 consists of
eight waterfront homesites.
The Partnership sold three homesites in 1998 from Cambridge, a
single-family residential development located at Geist Lake. In 1998, homesite
revenue from such Cambridge sales was $197,000. The Marina I L.P., a joint
venture, sold 28 homesites from Cambridge in 1998. See "Marina I" below. At
December 31, 1998, the Partnership had eight homesites remaining to be sold, of
which six are waterfront, while Marina I had 68 homesites remaining to be sold,
of which 24 are waterfront. Marina I developed 18 homesites which were finished
in early 1999. When complete, Cambridge will include more than 400 homesites of
which 305 have been developed. Most of the homesites owned entirely by the
Partnership have been sold so that future homesite sales will be primarily from
Marina I.
The Partnership substantially completed development of Morse Overlook
in 1996, an upscale single-family homesite project located at Morse Lake. In
1998, the Partnership completed development of an additional seven waterfront
homesites. Morse Overlook now includes 50 homesites, of which 27 are waterfront.
In 1998, the Partnership sold 11 homesites from Morse Overlook of which nine
were waterfront homesites. These sales generated homesite revenue of $1,800,000.
At December 31, 1998, the Partnership had 34 homesites in inventory of which 13
were waterfront.
During 1998, the Partnership completed development of Sail Place, a new
residential development at Geist Lake which includes 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 spent approximately
$746,000 for the development of Sail Place in 1997 and an additional $298,000 in
1998. The Partnership spent $363,000 in 1997 and an additional $410,000 in 1998
for construction of three speculative homes at Sail Place.
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 1999. 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 1998, 1997 and 1996, interest rates on homesites sold
on contract were 9% the first year, 10% in the second year, and 12% for the
remainder.
<PAGE>3
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, 1998. There were no
payments made to builders under the builder support program in 1998.
Investment Property. The Partnership continues to acquire and sell
commercial investment land near Geist and Morse Lakes. During 1998, the
Partnership sold two parcels of land for a total of $605,000. Most of the
commercial land near Geist Lake has been sold.
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 $289,400 in rental income
from Marina Village in 1998. The Partnership has completed the new Geist Marina
building (see "Marine Operations" below). The waterfront land previously
occupied by the service buildings is now available for other uses.
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. Marina I owns 73 acres of land held for development and has 52
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 $545,000 and $555,000, respectively, in distributions during 1998.
Additionally, the Partnership recognized $1,072,000 in equity earnings from
Marina I for the 28 homesites sold in Cambridge and other related activities in
1998. 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 $162,000 net loss for 1998, of which the Partnership
accounted for its 50% share as a decrease in its investment in the Corporation.
The Corporation expects minor operating losses for the next several years.
During 1998, the Corporation retired a $1,567,000 bank loan which was
outstanding at December 31, 1997 from the proceeds of a $1,350,000 demand note
borrowing from the Partnership with the remainder paid from the Corporation's
internal funds.
<PAGE>4
Dockside Cafe. The Partnership sold its limited partnership interest in
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 $120,000 in cash for such
interest. In addition, the Partnership received $61,000 in net distributions
from Dockside Cafe in 1998. The Partnership leases the restaurant buildings to
Dockside Cafe, and realized $231,000 in rental income in 1998.
Marine Operations
The Partnership owns two marinas located at Geist and Morse Lakes. The
marinas consist of approximately 1,200 boat docks, three 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 and an additional $200,000 in 1998 for
construction of a new marine building at the Geist Marina, which includes a boat
sales area, an area for marine supplies and four service bays.
Marine operations accounted for 42 percent of the Partnership's
revenues in 1998, 43 percent in 1997, and 41 percent in 1996. 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 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 three pools. The operating season for the
pools begins on Memorial Day weekend and extends to 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.
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."
<PAGE>5
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 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.
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 approximately 35 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 was 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.
<PAGE>6
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.
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.
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.
<PAGE>7
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 41,600 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.
Computer Systems and Year 2000 Issues
The Partnership is currently upgrading its computer systems to provide
a more complete management information system, and accordingly will install
software that is anticipated will properly recognize the Year 2000 to avoid
system failures. It is anticipated that this upgrade will be complete by June
30, 1999. The cost of the Year 2000 compliance within this system change is not
identifiable, but is not deemed material.
No estimate has been made by the Partnership as to any adverse impact
that may result from the failure of the Partnership's vendors or suppliers to
become Year 2000 compliant. If the Partnership or one or more of the third party
vendors or suppliers fail to complete its Year 2000 program in a timely manner,
there can be no assurance that such failure will not have a material adverse
effect on the Partnership's operations or financial plan. The Partnership has
not developed a Year 2000 contingency plan that would address Year 2000 related
problems experienced by either the Partnership or one or more of its third party
vendors or suppliers.
The foregoing discussion of Year 2000 issues include forward-looking
statements reflecting the Partnership's current assessment with respect to its
Year 2000 compliance efforts and the impact of Year 2000 issues on the
Partnership's business and operations. Various factors could cause actual
results to differ materially from those contemplated by such assessment and
forward-looking statements, including many factors that are beyond the control
of the Partnership. These factors include, but are not limited to,
representations by vendors and customers, technological advancements, economic
conditions and competitive considerations.
ITEM 2. PROPERTIES.
The Partnership's properties are substantially described in Item 1 of this
Part I. See "Investment Real Estate" and "Marine Operations."
<PAGE>8
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.
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 1998.
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 1997 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. The table also
sets forth for 1998 the representative high and low bid quotations of the
Partnership's Limited Partner Units as reported through a matching service made
available by the Partnership. Such bids represent non-binding indications of
interest in buying and not a firm commitment to buy.
1997 1998
---- ----
High Low High Low
First Quarter Ended Trade Trade Bid Bid
------------------- ----- ----- --- ---
March 31 .................... $28 1/8 $28 -- --
June 30 ..................... 33 28 $30 $28
September 30 ................ 33 1/2 27 30 30
December 31 ................. 33 29 1/8 31 1/2 30 1/2
<PAGE>9
There is no established public trading market for the Limited Partner
Units. During the 60-day period that ended March 25, 1999, there was one bid to
purchase at $31.50 per unit. The source of the bid quotation is through a
matching service made available by the Partnership, and such bids represent
non-binding indications of interest in buying and not a firm commitment to buy.
During 1998 there were 1,260 units traded through the matching service.
In addition, the Partnership acquired and retired 468 units at a price of $36
per unit through an odd lot tender whereby an offer was made to acquire any and
all units from partners that held less than 100 units in total. The Partnership
is aware that additional units were traded outside of the matching service
during 1998. In order to comply with the federal tax rules, the Partnership will
not recognize a transfer conducted outside of the matching service unless such
transfer meets a specified exception that will not endanger the Partnership's
continued treatment as a partnership for federal income tax purposes (see Item 1
- - Taxation Of Interests In Publicly Traded Partnerships). In such cases, the
Partnership may at its option recognize such transfers.
On March 25, 1999 there were approximately 411 record holders of
Limited Partner Units of the Partnership.
On each of April 2,1998 and April 17, 1997, the Partnership made cash
distributions of $3.50 and $3.25 respectively per unit. No other cash
distributions were made during 1997 and 1998.
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.
<PAGE>10
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the years in
the five-year period ended December 31, 1998 are derived from the financial
statements of the Partnership, which have been audited by KPMG LLP, independent
certified public accountants. The financial statements for the years ended
December 31, 1998, 1997, and 1996, and the auditors' report thereon, are
included in Part II, Item 8.
<TABLE>
<CAPTION>
(In thousands, except per unit or share amounts)
Years Ended December 31
Selected Statement of Earnings Data: 1998 1997 1996 1995 1994
- ------------------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Homes and homesite sales $4,222 $2,733 $3,387 $4,992 $3,331
Marine revenues 4,784 3,791 3,156 3,065 3,062
Gain on land sales 498 661 40 498 67
Equity in earnings of investee companies 1,032 992 386 920 693
Other revenues 862 726 723 602 409
Earnings before income taxes 3,809 3,742 3,034 4,391 2,705
Net earnings 3,809 3,742 3,034 4,391 2,705
Earnings per unit 1) 5.64 5.54 4.49 6.50 4.01
Cash distribution per unit 1) 3.50 3.25 3.25 2.00 1.00
Selected Balance Sheet Data:
Total assets $21,643 $20,038 $18,450 $17,691 $14,459
Debt obligations - - - - -
Partners' equity 20,607 19,178 17,630 16,786 13,744
</TABLE>
1)Earnings and cash distribution per unit have been calculated on the
following basis:
<TABLE>
<CAPTION>
Earnings Cash Distributions
General Limited General Limited
Partner Partner Partner Partner
Period Units Units Units Units
<S> <C> <C> <C> <C>
1998 257,952 417,183
January 1-November 30 257,952 417,183
December 1 - December 31 257,952 416,715
1997 201,188 473,947 201,188 473,947
1996 196,714 478,421
July 1 - December 31 201,188 473,947
January 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
</TABLE>
<PAGE>11
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 1998 were consistent
with 1997, and included revenue from homes and 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 37 percent in 1998 compared with 31 percent for 1997 and 44
percent in 1996, and marine operations, which accounted for 42 percent of the
Partnership's revenues in 1998 as compared to 43 percent in 1997 and 41 percent
in 1996. In addition, equity in earnings from investee companies accounted for 9
percent of revenue in 1998 as compared to 11 percent in 1997 and 5 percent in
1996.
Homesite Sales
The following table presents the total homesite sales as well as
dispersion by community:
- ------------ ------------ ------------- ---------------- --------
Year Bridgewater Cambridge Morse Overlook Total
- ------------ ------------ ------------- ---------------- --------
1998 2 3 11 16
1997 7 13 1 21
1996 4 18 4 26
- ------------ ------------ -------------- --------------- --------
Home Sales
During 1998, the Partnership completed construction and sold six homes
compared to none in the prior years.
Marina I L.P.
The Partnership is the general partner of Marina I which has also
developed homesites in Cambridge. During 1998, Marina I sold 28 homesites from
Cambridge as compared to 21 homesite sales in 1997 and 17 in 1996. 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.
The Partnership's development or sales of investment real estate and
residential homes and homesites are affected by several factors such as economic
conditions, interest rates, zoning, environmental regulation, availability of
utilities, population growth in the area, and competition.
<PAGE>12
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, 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 homes and homesite sales, marine operations, land sales, and
bank loans will be sufficient to satisfy its working capital requirements
through the end of 1999. On December 31, 1998, the Partnership had cash and cash
equivalents, including short-term investments, of $5,961,000. On December 31,
1998, the Partnership did not have any significant contractual commitments for
capital expenditures to be made during 1999. During 1998, the Partnership
expended approximately $1,845,000 for home and homesite development costs. In
addition, approximately $24,000 was spent for the Partnership's commercial
properties, and $649,000 was expended for marina property and equipment.
On a long-term basis, major sources of liquidity are expected to be
revenues from marine operations, sales of homes and 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
1998 Compared to 1997. Net earnings increased by $66,000 in 1998 from
1997. This increase was primarily due to an increase in earnings after direct
costs of $167,000 from marine operations, an increase in net rental income of
$136,000 and an increase in equity earnings from investee companies of $40,000.
Such increases were partially offset by a decrease in earnings from the sale of
homesites of $71,000, a decrease in gains on the sale of investment land of
$163,000 and an increase in other expenses of $42,000.
Earnings from homes and homesite sales were $1,297,000 in 1998, which
compares to $1,368,000 in 1997. Earnings from homesite sales decreased in 1998
compared to 1997 due to a shift of homesite sales to Marina I. This reduction
was partially offset by the sale of six completed homes improving earnings as
compared to 1997.
The Partnership recognized $1,072,000 as its share of the earnings from
Marina I in 1998, compared to $962,000 in 1997. Such increase results from
homesite sales of $3,447,000 in 1998 as compared to $3,057,000 in 1997.
<PAGE>13
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 1998, the Partnership sold commercial property held for
investment at Geist and Morse Lakes for an aggregate $605,000, which resulted in
a gain of $498,000 compared to a gain of $661,000 in 1997.
Earnings from marine operations increased in 1998 over 1997 as a result
of an increase in revenues of $994,000. This results from substantially
consistent increases in all significant areas of marine operations. Such
increases are primarily attributable to volume increases stemming from a strong
economic environment. The marine business is recreational in nature and a good
economic climate results in more disposable income, some of which is directed to
recreational goods and services.
The Partnership is a 50 percent owner in Flatfork Creek Utility, Inc.
(See Item 1 "Business") As a result, the Partnership recognized a loss in 1998
of $81,000 compared with equity income of $20,000 in 1997. Flatfork expects
minor operating losses for the next several years.
On April 2, 1998, the Partnership made a cash distribution to the partners
of record on March 25, 1998, of $3.50 per unit of partnership interest, for a
total of $2,363,000.
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.
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.
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.
<PAGE>14
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.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K, the Partnership is not
required to provide information in response to this Item 7A because it satisfies
the requirements for a "Small Business Issuer".
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, 1998, 1997, and 1996, and the
independent auditors' reports thereon. A list of the reports and financial
statements appears in response to Item 14 of this report.
<PAGE>15
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, 1998 and 1997, and the related statements of
earnings, partners' equity and cash flows for each of the years in the
three-year period ended December 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Indianapolis, Indiana
February 19, 1999
<PAGE>16
THE MARINA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
---------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 5,960,801 5,531,556
Receivables from homesite sales 1,032,963 1,468,895
Other receivables and assets 415,867 519,445
Properties held for sale:
Homes and homesites available for sale 3,256,585 3,607,862
Land and land improvements (note 3) 941,116 735,678
----------- -----------
4,197,701 4,343,540
----------- -----------
Property and equipment (note 2):
Marine property and equipment, net 3,014,095 2,630,222
Recreational facilities, net 500,741 508,001
Commercial properties, net 2,301,370 2,472,045
----------- -----------
5,816,206 5,610,268
----------- -----------
Other investments (note 4):
Marina I 2,930,267 2,404,228
Investments in and advances to Flatfork Creek Utility 1,289,030 20,482
Dockside Cafe -- 139,119
----------- -----------
$21,642,835 20,037,533
=========== ===========
Liabilities and Partners' Equity
Accounts payable 649,690 590,865
Accrued bonuses 104,267 66,666
Deferred revenues and sale deposits 282,161 202,195
----------- -----------
Total liabilities 1,036,118 859,726
----------- -----------
Partners' equity:
General partner - 257,952 and 201,188 units
outstanding 7,894,298 5,731,363
Limited partners - 416,715 and 473,947 units
outstanding 12,712,419 13,446,444
----------- -----------
Total partners' equity 20,606,717 19,177,807
----------- -----------
$21,642,835 20,037,533
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>17
THE MARINA LIMITED PARTNERSHIP
Statements of Earnings
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------------- --------------- ---------------
Revenues:
<S> <C> <C> <C>
Homes and homesite sales $ 4,222,041 2,733,459 3,386,508
Marine operations 4,784,087 3,790,502 3,156,123
Equity in earnings of investee companies (note 4) 1,031,830 992,234 386,089
Interest income 464,216 445,628 428,338
Rental income, net (note 6) 346,649 210,660 202,504
Recreational facilities, net 50,777 69,033 91,754
Gain on sales of land held for investment (note 3) 497,853 661,164 39,981
---------------- --------------- ---------------
11,397,453 8,902,680 7,691,297
---------------- --------------- ---------------
Costs and expenses:
Cost of homes and homesites sold and related expenses 2,924,726 1,365,040 1,378,868
Marine operations 3,504,190 2,677,554 2,282,929
General and administrative 1,063,047 1,036,074 919,277
Management fees paid to general partner (note 1) 96,759 81,665 76,515
---------------- --------------- ---------------
7,588,722 5,160,333 4,657,589
---------------- --------------- ---------------
Net earnings 3,808,731 3,742,347 3,033,708
Net earnings attributable to general partner 1,455,304 1,115,207 894,471
---------------- --------------- ---------------
Net earnings attributable to limited partners $ 2,353,427 2,627,140 2,139,237
================ =============== ===============
Weighted average number of limited
partner units outstanding 417,144 473,947 476,184
================ =============== ===============
Net earnings per limited partner unit $ 5.64 5.54 4.49
================ =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>18
THE MARINA LIMITED PARTNERSHIP
Statement of Partners' Equity
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
General Limited Total
partner's partners' partners'
equity equity equity
---------------- ---------------- -----------------
<S> <C> <C> <C>
Balance December 31, 1995 $ 4,907,830 11,877,786 16,785,616
Exchange of 4,474 units, net 105,721 (105,721) --
Distributions to partners ($3.25 per unit) (639,321) (1,554,868) (2,194,189)
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
Exchange of 56,764 units 1,610,463 (1,610,463) --
Repurchase of 468 units ($36.00 per unit) -- (16,848) (16,848)
Distributions to partners ($3.50 per unit) (902,832) (1,460,141) (2,362,973)
Net earnings 1,455,304 2,353,427 3,808,731
---------------- ---------------- -----------------
Balance December 31, 1998 $ 7,894,298 12,712,419 20,606,717
================ ================ =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>19
THE MARINA LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 3,808,731 3,742,347 3,033,708
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of properties 467,502 403,757 384,128
Equity in earnings of investee companies (1,031,830) (992,234) (386,089)
Receivables on current year's homesite sales (310,597) (723,283) (586,949)
Collection of prior years' homesite sales 746,529 715,378 1,054,228
Gain on sales of land held for investment (497,853) (661,164) (39,981)
Home and homesite development costs (1,845,374) (1,727,510) (1,164,570)
Cost of home and homesites sold 2,194,850 500,253 1,001,458
Change in operating assets and liabilities 279,970 132,553 (122,307)
---------------- ---------------- ----------------
Net cash provided by operating activities 3,811,928 1,390,097 3,173,626
---------------- ---------------- ----------------
Cash flows from investing activities:
Distributions received from Marina I 545,463 499,467 397,630
Advances to Flatfork Creek Utility (1,350,000) -- --
Distributions received from Dockside Cafe 180,899 66,532 37,324
Additions to marine property and equipment (648,764) (753,541) (189,402)
Additions to recreational facilities (23,916) (174,788) (8,295)
Additions to commercial properties (760) (80,387) (207,534)
Land and land development costs (260,369) (11,127) (777,770)
Proceeds from sales of land held for investment 554,585 1,201,514 44,250
Maturity (purchase) of U.S. Treasury note -- 996,875 (996,875)
---------------- ---------------- ----------------
Net cash provided (used) by investing activities (1,002,862) 1,744,545 (1,700,672)
---------------- ---------------- ----------------
Cash flows from financing activities:
Repurchase of limited partner units (16,848) -- --
Distributions to partners (2,362,973) (2,194,189) (2,194,189)
Utility refunds received -- -- 4,514
---------------- ---------------- ----------------
Net cash used by financing activities (2,379,821) (2,194,189) (2,189,675)
---------------- ---------------- ----------------
Net increase (decrease) in cash
and cash equivalents 429,245 940,453 (716,721)
Cash and cash equivalents at beginning of year 5,531,556 4,591,103 5,307,824
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 5,960,801 5,531,556 4,591,103
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>20
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
(a) General
The Marina Limited Partnership became a publicly traded limited
partnership on December 30, 1986, and the limited partner units
are registered securities and currently represent approximately 62
percent of the total Partnership units. 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 $719,000 at December 31, 1998. 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 were no
longer publicly traded. 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 and sale of homes and homesites and
the operation of marine facilities at Geist and Morse Lakes.
(b) 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.
(c) 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.
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, the
Marina I L.P. and third parties.
<PAGE>21
Sales of 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.
Revenues from homes sales are recognized upon the closing of each
residential unit when title is transferred to the homeowner.
(d) 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.
(e) 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
50% corporate investment in Flatfork Creek Utility, Inc., and
until sold on December 31, 1998, its 40% limited partner
investment in Dockside Cafe, L.P. The Partnership's share of the
net earnings and losses of these businesses is included currently
in earnings.
(f) 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.
(g) 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.
(h) Marine Revenues
Revenues for rental and storage from the Marine operations are
recognized on a straight-line basis over the term of the
agreement.
<PAGE>22
(i) 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.
(j) 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 routinely evaluates all of its real estate
investments 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 would be 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 at December 31 as follows:
1998 1997
-------------- ---------------
Land and land improvements $ 1,214,637 1,209,047
Buildings and equipment 8,516,290 7,848,440
----------- -----------
9,730,927 9,057,487
Accumulated depreciation (3,914,721) (3,447,219)
----------- -----------
$ 5,816,206 5,610,268
=========== ===========
(3) Land and Land Improvements
At December 31, land and land improvements consisted of the following:
1998 1997
--------- ---------
Unimproved land and residential land
under development $619,025 620,158
Commercial sites 322,091 115,520
-------- --------
$941,116 735,678
======== ========
<PAGE>23
In 1998, two parcels of commercial land were sold to unrelated parties.
In 1997, a 13 acre parcel of farm land and a parcel of commercial land
were sold to unrelated parties. Sales were for cash resulting in
revenues and gains as follows:
1998 1997 1996
--------- ---------- --------
Revenue $ 605,000 1,307,055 44,250
Gain 497,853 661,164 39,981
(4) Other Investments
(a) Marina I
The Partnership is a general partner with Irving Materials, Inc.
as limited partner in Marina I which develops homesites near Geist
Lake. The Partnership's equity in the earnings of Marina I
amounted to $1,071,502 in 1998, $971,752 in 1997 and $461,405 in
1996.
The following is a summary of balance sheet and operating
information (in thousands) of Marina I as of December 31, 1998 and
1997 and for the years then ended:
1998 1997
--------- ----------
Cash and cash equivalents $ 1,593 553
Homes and homesites available for sale
and land and land improvements 3,270 3,719
Receivables from homesite sales 860 652
Other assets 414 407
Liabilities (119) (222)
------- -------
Partners' equity $ 6,018 5,109
======= =======
Homesite sales and other revenues 3,601 3,156
Cost of homesites sold and expenses 1,592 1,311
------- -------
Net earnings $ 2,009 1,845
======= =======
The Partnership pays various operational costs incurred for Marina
I, which are reimbursed at actual or allocated amounts.
(b) Dockside Cafe
Through December 31, 1998, the Partnership was a limited partner
in Dockside Cafe, L.P. which operates restaurants at the Geist and
Morse Lake marinas. The Partnership constructed the restaurants
and leases them to Dockside Cafe, L.P. The limited partner
investment was sold to the general partner effective December 31,
1998. The Partnership continues to lease the restaurants.
<PAGE>24
(c) 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 own and operate the wastewater water
treatment plant. The Partnership transferred $738,000 of assets
and $424,000 of liabilities to the Corporation, as its sole
shareholder. The Partnership then sold 50% of its interest in the
Corporation to Irving Materials, Inc. for its book value of
$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, substantially all of the Corporation's 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 a loss of $81,451 in 1998, 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., were
guarantors of the Corporation's $2,500,000 loan, of which
$1,566,954 was outstanding at December 31, 1997. In 1998, the
Partnership advanced $1,350,000 to the Corporation. This advance,
which bears interest of 6.6% and is due on demand, along with
additional cash of the Corporation, was used to repay the loan.
(5) Notes Payable to Bank
The Partnership has a $2,000,000 unsecured line of credit which matures
July 1, 1999 and bears interest at the bank's prime rate. There were no
borrowings on the line of credit through December 31, 1998.
(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
$76,400, $69,600, and $90,000 for 1998, 1997 and 1996 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. Overage rents of
$5,100 for 1998 are included in rental income. No overage rents were
received for 1997 and 1996.
During 1995, the Partnership began operating a 20,000 square foot
retail and office development known as Marina Village. Included in
rental income is $289,400, $210,600 and $149,700 for 1998, 1997 and
1996, respectively, from the retail and office tenants. At December 31,
1998, 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 operating expenses.
The Partnership also leases certain real estate under short-term
operating leases for which rental income amounted to $17,800, $15,200
and $6,200 in 1998, 1997 and 1996, respectively.
<PAGE>25
The minimum rent payments due under operating leases in effect at
December 31, 1998 are summarized as follows:
Marina
Restaurants Village Total
------------- ------------ ----------
1999 $ 150,000 245,100 395,100
2000 150,000 207,800 357,800
2001 150,000 72,100 222,100
2002 150,000 42,800 192,800
2003 150,000 -- 150,000
--------- --------- ---------
$ 750,000 567,800 1,317,800
========= ========= =========
(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 1998, 1997 and 1996 is as follows (in thousands):
1998 1997 1996
--------- --------- ----------
Revenues:
Homes and homesites $ 4,222 2,733 3,387
Equity in earnings of homesite
investee company 1,072 962 461
-------- -------- --------
5,294 2,694 3,848
Marine operations 4,784 3,791 3,156
Other 1,319 1,417 687
-------- -------- --------
$ 11,397 8,903 7,691
======== ======== ========
Operating income:
Homes and Homesites sales,
including equity in earnings of
homesite investee company $ 2,370 2,330 2,469
Marine operations 1,280 1,113 873
Other 1,319 1,417 688
Administration (1,160) (1,118) (996)
-------- -------- --------
$ 3,809 3,742 3,304
======== ======== ========
Assets:
Homes and homesites sales,
including investment in
homesite investee company $ 7,222 7,481 5,501
Marine operations 3,087 2,779 2,361
Cash 5,961 5,532 5,588
Other 5,373 4,246 5,000
-------- -------- --------
$ 21,643 20,038 18,450
======== ======== ========
<PAGE>26
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, 1998 and 1997, and the related statements of earnings,
partners' equity and cash flows for each of the years in the three-year
period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December
31, 1998, in conformity with generally accepted accounting principles.
KPMG LLP
Indianapolis, Indiana
February 19, 1999
<PAGE>27
THE MARINA I L.P.
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
------------- -------------
<S> <C> <C>
Cash and cash equivalents $1,592,822 553,361
Receivables from homesite sales 859,879 651,656
Other receivables and assets 48,845 18,238
Prepaid hook-up fees to Flatfork Creek Utility 365,722 388,930
Properties held for sale:
Homes and homesites available for sale 1,680,380 2,623,338
Land and land improvements 1,589,830 1,095,715
---------- ----------
$6,137,478 5,331,238
========== ==========
Liabilities and Partners' Equity
Accounts payable and accrued expenses $ 55,761 60,470
Deferred revenues and sale deposits 31,700 62,500
Accounts payable to affiliates 31,650 99,017
---------- ----------
Total liabilities 119,111 221,987
---------- ----------
Partners' equity:
General partner 2,877,167 2,351,124
Limited partner 3,141,204 2,758,127
---------- ----------
Total partners' equity 6,018,371 5,109,251
---------- ----------
$6,137,482 5,331,238
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>28
THE MARINA I L.P.
Statements of Earnings
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- ------------
Revenues:
<S> <C> <C> <C>
Homesite sales $3,446,500 3,056,941 1,363,884
Interest income 155,021 99,242 80,069
---------- ---------- ----------
3,601,521 3,156,183 1,443,953
---------- ---------- ----------
Costs and expenses:
Cost of homesites sold and related expenses 1,555,695 1,281,591 569,181
General and administrative 36,710 29,964 9,599
---------- ---------- ----------
1,592,405 1,311,555 578,780
---------- ---------- ----------
Net earnings 2,009,116 1,844,628 865,173
Net earnings attributable to general partner 1,071,502 961,813 461,405
---------- ---------- ----------
Net earnings attributable to limited partner $ 937,614 882,815 403,768
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>29
THE MARINA I L.P.
Statements of Partners' Equity
Years ended December 31, 1998, 1997 and 1996
General Limited Total
partner's partner's partners'
equity equity equity
------------- -------------- -------------
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
Distributions to partners (545,463) (554,537) (1,100,000)
Net earnings 1,071,502 937,614 2,009,116
----------- ----------- -----------
Balance December 31, 1998 $ 2,877,163 3,141,204 6,018,367
=========== =========== ===========
See accompanying notes to financial statements.
<PAGE>30
THE MARINA I L.P.
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 2,009,116 1,844,628 865,173
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Receivables on current year's homesite sales (419,672) (551,962) (125,415)
Collection on prior years' homesite sales 211,449 189,062 489,198
Homes and homesites development costs (161,319) (511,423) (361,520)
Cost of homesites sold 1,104,277 909,068 425,646
Change in operating assets and liabilities (110,275) (326,355) 56,298
----------- ----------- -----------
Net cash provided by operating activities 2,633,576 1,553,018 1,349,380
----------- ----------- -----------
Cash flows from investing activities:
Land and land development costs (494,115) (922,591) (492,403)
----------- ----------- -----------
Net cash used by investing activities (494,115) (922,591) (492,403)
----------- ----------- -----------
Cash flows from financing activities:
Distributions to partners (1,100,000) (924,263) (850,000)
----------- ----------- -----------
Net cash used by financing activities (1,100,000) (924,263) (850,000)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 1,039,461 (293,836) 6,977
Cash and cash equivalents at beginning of year 553,361 847,197 840,220
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,592,822 553,361 847,197
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>31
THE MARINA I L. P.
Notes to Financial Statements
December 31, 1998, 1997 and 1996
Summary of Significant Accounting Policies
(a) 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 Corporation, 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 partner's tax
basis. Earnings and distributions are allocated as follows:
o 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.
o For earnings from all other homesite sales, TMLP is first allocated a
"management fee" based on profits from the homesite sales, with the
remainder allocated 50% to each partner.
(b) Cash and Cash Equivalents
Cash and cash equivalents include cash balances and money market
investments with maturities of less than three months.
(c) 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 improvements are
allocated to homesite sales 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.
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 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.
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.
<PAGE>32
THE MARINA I L. P.
Notes to Financial Statements
December 31, 1998, 1997 and 1996
The Partnership routinely evaluates all of its real estate investments 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.
(d) Financial Instruments
The carrying amounts of the receivables approximate their fair value
because 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.
(e) 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.
(f) 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>33
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.
<TABLE>
<CAPTION>
Year of
Name Principal Occupation Birth
<S> <C> <C>
Patrick J. Bruggeman President, American Steel Investment Corporation, Ft. Wayne, Indiana
(manufacturer of wire rope) 1948
Lawrence L. Buell Certified Public Accountant and Member, Indiana House of
Representatives 1) 1934
Stanley E. Hunt Retired 2) 1930
Allen E. Rosenberg President of the General Partner 3) 1935
Allen E. Rosenberg II Vice President and Assistant Treasurer of the General Partner 4) 1955
Donald J. Calabria Vice President, Treasurer and Secretary of the General Partner 5) 1939
<FN>
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.
</FN>
</TABLE>
<PAGE>34
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.
SECTION 16(a): BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
General Partner's Directors, executive officers and persons who beneficially own
more than 10 percent of the Partnership's Limited Partner Units to file with the
Securities and Exchange Commission reports showing ownership of and changes in
ownership of the Partnership's Limited Partner Units and other equity
securities. On the basis of reports and representations submitted by the General
Partner's Directors, executive officers, and greater-than-ten-percent owners,
the Partnership believes that all required Section 16(a) filings for 1998 were
timely made, except that the filing to report a purchase by one Director, Mr.
Bruggeman, was inadvertently not filed on time.
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, 1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE
Name and
Principal Position Year Salary Bonus
Allen E. Rosenberg 1998 $200,000 $148,541
President, Director of 1997 200,000 180,667
The General Partner 1996 199,653 187,992
Allen E. Rosenberg II 1998 $110,000 $100,000
Vice President, Assistant Treasurer 1997 86,353 103,206
And Director of the General Partner 1996 18,000 55,000
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. In addition to the fees received as a
Director, Mr. Hunt receives a quarterly retainer of $1,500 for providing
consulting services to the Partnership.
<PAGE>35
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
---- ------
1998 $18,150
1997 39,211
1996 1,328
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
---- ------
1998 $130,391
1997 141,455
1996 186,664
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 in 1997 and $100,000 in 1998 was
paid to Mr. Rosenberg II as the minimum amounts payable under the plan. 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 $97,000 in 1998, 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>36
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 25,
1999.
Number of Percent
Limited Partner Units Of
Name Beneficially Owned Class
Patrick J. Bruggeman 15,600 3.7%
Allen E. Rosenberg 4,940 1 1.2%
Allen E. Rosenberg II 2,665 2 0.6%
Stanley E. Hunt 1,000 0.2%
All Directors and Officers of the
General Partner as a Group (6 Persons) 24,205 3 5.8%
1. Includes 4,940 Units owned by Mr. Rosenberg's wife.
2. Includes 2,665 Units owned by Mr. Rosenberg II's spouse and children.
3. Includes 7,605 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.
During 1997, The Board of Directors of the General Partner approved 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 25, 1999 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.
<PAGE>37
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 25, 1999 is as set forth
in the following table:
------------------------------------------- ---------------------
Shareholder Percentage 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 Mr. Rosenberg 15.5%
------------------------------------------- ---------------------
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.
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.
<PAGE>38
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.
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.
The required information is inapplicable.
<PAGE>39
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, 1998 and 1997.
Statements of Earnings -- Years Ended December 31, 1998, 1997, and
1996.
Statements of Partners' Equity -- Years Ended December 31, 1998, 1997
and 1996.
Statements of Cash Flows -- Years Ended December 31, 1998, 1997 and
1996.
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:
<TABLE>
<CAPTION>
Exhibit Page No. or
Number Exhibit Filed With
<S> <C> <C>
3.1 Certificate of Limited Partnership of The Marina Limited Partnership (3)
3.2 Agreement of Limited Partnership of The Marina Limited Partnership (3)
4.1 Agreement of Limited Partnership of The Marina Limited Partnership (3)
Defining the rights of security holders is filed as Exhibit 3.2
10.1 License Agreement, dated October 19, 1970, between Indianapolis (2)
Water Company and The Shorewood Corporation
10.2 Conveyances of Easement Rights for the purpose of Installing and (2)
Maintaining Boat Docks, dated June 30, 1982, executed by The
Shorewood Corporation in favor of The Creek Land Company, Inc.
<PAGE>40
10.3 Consent to Assignment of License Rights, dated March 11, 1983, (2)
between Indianapolis Water Company, The Shorewood Corporation
and The Creek Land Company, Inc.
99.1 Restated Articles of Incorporation of The Marina II Corporation (1)
99.2 Restated Bylaws of The Marina II Corporation (1)
99.3 Shareholders' Agreement (3)
</TABLE>
- --------------------------
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 1998 by the Partnership.
<PAGE>41
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 25, 1999 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
- ------------------
Patrick J. Bruggeman Director
/s/Lawrence L. Buell
Lawrence L. Buell Director March 25, 1999
/s/Stanley E. Hunt
Stanley E. Hunt Director March 25, 1999
/s/Allen E. Rosenberg Director and President
Allen E. Rosenberg (Principal Executive Officer) March 25, 1999
Director,
/s/Allen E. Rosenberg II Vice President and
Allen E. Rosenberg II Assistant Treasurer March 25, 1999
Vice President,
/s/Donald J. Calabria Treasurer, and Secretary
Donald J. Calabria (Principal Financial Officer) March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000803605
<NAME> Marina Limited Partnership
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 5,960,801
<SECURITIES> 0
<RECEIVABLES> 1,448,830
<ALLOWANCES> 0
<INVENTORY> 4,197,701
<CURRENT-ASSETS> 0
<PP&E> 5,816,206
<DEPRECIATION> 467,502
<TOTAL-ASSETS> 21,642,835
<CURRENT-LIABILITIES> 1,036,118
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,606,717
<TOTAL-LIABILITY-AND-EQUITY> 21,642,835
<SALES> 9,006,128
<TOTAL-REVENUES> 11,397,453
<CGS> 6,428,916
<TOTAL-COSTS> 7,588,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,808,731
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<NET-INCOME> 3,808,731
<EPS-PRIMARY> 5.64
<EPS-DILUTED> 5.64
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