UNITED STATES
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
For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 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
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 27, 2000, and assuming solely for
purposes of this calculation that all executive officers and Directors of the
registrant are affiliates, was approximately $14,404,000. The source of the bid
quotation is the matching service made available by the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
Item 1 - Business 1
Item 2 - Properties 7
Item 3 - Legal Proceedings 7
Item 4 - Submission of Matters to a Vote of Security Holders 7
PART II
Item 5 - Market for Partnership's Common Equity
and Related Security Holder Matters 7
Item 6 - Selected Financial Data 9
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7A - Quantitative and Qualitative Disclosures
About Market Risk 13
Item 8 - Financial Statements and Supplementary Data 13
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 32
PART III
Item 10 - Directors and Executive Officers 32
Item 11 - Executive Compensation 33
Item 12 - Security Ownership of Certain Beneficial Owners
and Management 35
Item 13 - Certain Relationships and Related Transactions 37
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 38
SIGNATURES 40
<PAGE>
PART I
ITEM 1. BUSINESS.
General
The Marina Limited Partnership (the "Partnership") was organized as an
Indiana limited partnership under the laws of the State of Indiana on October 7,
1986 for the purpose of reorganizing the business of The Marina Corporation (the
"Company"). The Company was reorganized into a publicly traded limited
partnership in order to eliminate the "double" federal income tax on its future
earnings and distributions. The Partnership is the successor-issuer to the
Company. On December 29, 1986, the shareholders of the Company approved the plan
to reorganize the Company into the Partnership. On December 30, 1986, pursuant
to the plan of reorganization, all of the assets and liabilities of the Company
were transferred to the Partnership in exchange for a number of units of
interest ("Units") in the Partnership equal to the number of outstanding shares
of the Company's Common Stock, and the Company distributed the Units to or for
the benefit of its shareholders. Units represent either general partner
interests ("General Partner Units") or limited partner interests ("Limited
Partner Units"). See Item 5, "Market for Partnership's Common Equity and Related
Security Holder Matters." Following the distribution of the Units, the Company
was dissolved.
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, 1999, the Partnership owned approximately 345 acres of
investment real estate. Approximately 271 acres of this investment real estate
are adjacent to Geist Lake, and approximately 74 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 41 percent of the Partnership's revenues for 1999, 37 percent for 1998, and
31 percent for 1997. There were no sales of investment land in 1999. Such sales
accounted for 4 percent of the Partnership's revenues for 1998 and 7 percent for
1997.
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, 1999, the Partnership's investment real
estate at Geist Lake consisted of approximately 271 acres, which are zoned
either for single-family residential use, multi-family residential use,
commercial use, recreational use, or agricultural use. Approximately 23 acres of
the land at Geist Lake is being used for Geist Marina and Marina Village and
approximately 10 acres is being used for the Geist Harbor Club facilities. See
"Marine Operations" and "Investment Real Estate -- Commercial Development"
below.
1
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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, 1999, the Partnership's investment
properties at Morse Lake consisted of approximately 74 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.
Residential Development. Bridgewater, located near Geist Marina, was the
Partnership's first single-family project. It includes 81 homesites, of which
development is complete. The Partnership sold three waterfront homesites from
Bridgewater in 1999. Homesite revenue from these sales was $965,000. Homesite
inventory in Bridgewater at December 31, 1999 consists of five waterfront
homesites.
The Partnership sold eight homesites in 1999 from Cambridge, a
single-family residential development located at Geist Lake. In 1999, homesite
revenue from such Cambridge sales was $1,062,000. The Marina I L.P., a joint
venture, sold 42 homesites from Cambridge in 1999. See "Marina I" below. At
December 31, 1999, the Partnership had no homesites remaining to be sold in
Cambridge, while Marina I had 28 homesites remaining to be sold, of which 6 are
waterfront. When complete, Cambridge will include more than 400 homesites of
which 305 have been developed. All of the homesites owned by the Partnership
have been sold so that future homesite sales in Cambridge will be from Marina I.
Marina I is currently in the process of developing a new section of 34
waterfront lots in Cambridge. These lots will be available in the spring of
2000.
The Partnership has developed Morse Overlook, an upscale single-family
homesite project located at Morse Lake. Morse Overlook includes 50 homesites
including 27 waterfront. In 1999, the Partnership sold six homesites from Morse
Overlook including one waterfront homesite. These sales generated homesite
revenue of $477,000. At December 31, 1999, the Partnership had 28 homesites in
inventory of which 12 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 sold five homesites with
homes in 1999 for total revenue of $2,809,000.
The Partnership is currently developing a new residential community in the
Geist Lake area containing 81 homesites in the first section. Canal Place will
be a combination of waterfront, water access and off-water lots with an
estimated total of 360 homesites. It is expected that homesites in the first
section will be available in the summer of 2000.
Marina I has developed Weatherstone, a new community in the Geist area
containing 62 homesites. All homesites are off-water and are being sold to an
upscale production builder who will provide homes in the upper price range for
production homes, below the price of the typical custom home. Currently the
contract provides for the builder to acquire three lots per month commencing in
March 2000.
2
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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 2000. See
"Investment Real Estate - Marina I", below.
Homesite Financing Arrangements. The Partnership sells residential
homesites for cash or mortgage. 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. In 1999, 1998 and 1997,
interest rates on homesites sold on contract were 9% the first year, 10% in the
second year, and 12% for the remainder.
Investment Property. The Partnership continues to acquire and sell
commercial investment land near Geist and Morse Lakes. During 1999, the
Partnership sold no investment land compared with two parcels of land for a
total of $605,000 in 1998. Most of the commercial land near Geist Lake has been
sold.
Marina Village. The Partnership operates a 21,000 square foot retail and
office development known as Marina Village. This building includes 15,000 square
feet of retail space 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 $248,000 in rental income from Marina Village in 1999.
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 the extraction is complete. The Partnership
is responsible for developing and selling the property for residential use.
The Partnership, as general partner, and Irving, as limited partner,
received $1,270,000 and $1,285,000 cash and property, respectively, in
distributions during 1999. Additionally, the Partnership recognized $2,040,000
in equity earnings from Marina I for the 42 homesites sold in Cambridge and
other related activities in 1999. 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 $70,000 net loss for 1999, 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 using the proceeds
of a $1,350,000 demand note borrowing from the Partnership with the remainder
paid from the Corporation's internal funds. During 1999, the Corporation retired
$750,000 of this borrowing.
3
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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.
Marine operations accounted for 37 percent of the Partnership's revenues in
1999, 42 percent in 1998, and 43 percent in 1997. 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 use was curtailed in the fall of 1999 due to the low water
with minimal impact on revenue from marine operations.
Recreational Facilities
The Partnership operates recreational facilities at Geist Lake for
residents of the Partnership's residential developments and residents of
communities developed by 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.
Future Operations
The General Partner expects that the Partnership will continue to: (1) sell
investment real estate from time to time depending on market conditions and
other factors; (2) pursue development activities, including the building of
homes on the Partnership's real estate; (3) seek to enhance the value of the
Partnership's investment real estate by making certain improvements and by
acquiring additional surrounding real estate; (4) acquire additional real estate
for investment; and (5) operate the marine business. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Competition
Investment Real Estate. Although there are numerous real estate properties
in the Indianapolis metropolitan area available for development of homesites,
there are only a limited number of water-oriented properties. The Partnership
believes that, of those water-oriented properties that are or will be
economically suitable for development of homesites, the Partnership's properties
are among those with the greatest long-term development potential, primarily
because of the character of the lakes to which the Partnership's properties are
adjacent and the extent and types of development at such lakes. There are,
however, water-oriented properties owned by other developers that are available
for development of homesites that are equally desirable. There is a new
residential project currently under development by a local developer at the
north end of Geist Lake which will include approximately 300 homesites, of which
approximately 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.
4
<PAGE>
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 waste disposal 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 33 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 four 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.
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. ATER 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.
5
<PAGE>
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.
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.
6
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ITEM 2. PROPERTIES.
The Partnership's properties are substantially described in Item 1 of this
Part I. See "Investment Real Estate" and "Marine Operations."
The Partnership has title to all of its real estate, substantially all of
which has been covered by blanket title insurance commitments. All of the
properties are subject to certain telephone, highway, pipeline and electric
power line easements. The Morse and Geist Lake properties are also subject to
the easements and restrictions of the Indianapolis Water Company ("IWC"), which
owns the reservoirs for water supply purposes. In connection with the
maintenance, protection and operation of its water supply reservoirs, IWC has
retained a 20-foot easement around the shoreline of both reservoirs and has
imposed restrictions on the adjacent land. IWC is permitted access to the lakes
for all purposes reasonably necessary to their operation and maintenance as
reservoirs, and certain uses of the land that could cause pollution of the lakes
are prohibited. There are no mortgages on the Partnership's real estate
properties.
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 1998 and 1999 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.
1998 1999
---- ----
High Low High Low
Quarter Ended Bid Bid Bid Bid
- - ------------- --- --- --- ---
March 31 $ -- $ -- $31.50 $31.50
June 30 $30.00 $28.00 $30.00 $30.00
September 30 $30.00 $30.00 $34.00 $34.00
December 31 $31.50 $30.50 $36.00 $36.00
7
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There is no established public trading market for the Limited Partner
Units. During the 60-day period that ended March 27, 2000, there were two bids
to purchase at $36 per unit. It is anticipated that such bids will be revised
downward once the Partnership makes an annual distribution. 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 1999 there were 6,117 units traded through the matching service. The
Partnership is aware that additional units were traded outside of the matching
service during 1999. 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 27, 1999 there were approximately 408 record holders of Limited
Partner Units of the Partnership.
On each of April 5, 1999 and April 2,1998, the Partnership made cash
distributions of $3.85 and $3.50 respectively per unit. No other cash
distributions were made during 1998 and 1999.
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.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the years in the
five-year period ended December 31, 1999 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, 1999, 1998, and 1997, and the auditors' report thereon, are
included in Part II, Item 8.
(In thousands, except per unit or share amounts)
Years Ended December 31
<TABLE>
<CAPTION>
Selected Statement of Earnings Data: 1999 1998 1997 1996 1995
- - ------------------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Homes and homesite sales $ 5,649 $ 4,222 $ 2,733 $ 3,387 $ 4,992
Marine revenues 5,106 4,784 3,791 3,156 3,065
Gain on land sales -- 498 661 40 498
Equity in earnings of investee companies 2,005 1,032 992 386 920
Other revenues 841 862 726 723 602
Earnings before income taxes 4,212 3,809 3,742 3,034 4,391
Net earnings 4,212 3,809 3,742 3,034 4,391
Earnings per unit 1) 6.24 5.64 5.54 4.49 6.50
Cash distribution per unit 1) 3.85 3.50 3.25 3.25 2.00
Selected Balance Sheet Data:
Total assets 22,982 $21,643 $20,038 $18,450 $17,691
Debt obligations -- -- -- -- --
Partners' equity 22,221 20,607 19,178 17,630 16,786
</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>
1999 257,952 416,715 257,952 416,715
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>
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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 1999 were consistent with
1998, 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 as follows:
1999 1998 1997
---- ---- ----
Homes and Homesite Sales 41% 37% 31%
Marine Operations 37% 42% 43%
Equity in Earnings From Investee Companies 15% 9% 11%
Homesite Sales
The following table presents the total homesite sales as well as dispersion
by community:
Year Bridgewater Cambridge Morse Overlook Total
---- ----------- --------- -------------- -----
1999 3 8 6 17
1998 2 3 11 16
1997 7 13 1 21
Home Sales
During 1999, the Partnership completed construction and sold eight home
compared to six in 1998.
Marina I L.P.
The Partnership is the general partner of Marina I which has also developed
homesites in Cambridge. During 1999, Marina I sold 42 homesites from Cambridge
as compared to 28 homesite sales in 1998 and 21 in 1997. Marina I recorded
$612,500 in revenue during 1999 as its share from the Partnership's sale of
homesites that were partially owned by Marina I, as compared to none in 1998 and
$104,600 in 1997.
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.
10
<PAGE>
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.
Reservoir Water Levels
Marine Operations
During 1999 the precipitation experienced in the Morse and Geist Lakes area
was insufficient to maintain the water at normal levels. Such condition had a
minimal impact on the Partnerships' marine operations for the year and will not
significantly impact the first quarter of 2000. However, if precipitation is
insufficient to return the water to substantially normal levels by early spring,
the Partnerships' Marine results of operations in the year 2000 will be
adversely affected. During the first quarter of 2000 the water levels have risen
but are not yet at normal level. In certain previous years the reservoirs have
experienced inadequate precipitation to maintain the water level but the
reservoirs have always returned to normal levels in the spring. However, there
is no assurance that the same pattern will be repeated. The foregoing discussion
of reservoir water levels include forward-looking statements reflecting the
Partnership's current knowledge of the impact of water levels on marine
operations. Various factors (including precipitation levels or actions by the
Indianapolis Water Company, which controls the reservoirs for water supply
purposes) could impact marine operations in a manner materially different from
those contemplated by the Partnership.
Homesite Sales
Because of the low water level described in the preceding paragraph, should
the reservoirs not return to substantially normal levels, there may be an
adverse impact on water oriented homesite sales.
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 2000. On December 31, 1999, the Partnership had cash and cash
equivalents, including short-term investments, of $8,527,000. On December 31,
1999, the Partnership did not have any significant contractual commitments for
capital expenditures to be made during 2000. During 1999, the Partnership
expended approximately $2,866,000, net of payments received, for home and
homesite development costs. In addition, approximately $63,000 was spent for the
Partnership's recreational facilities, and $405,000 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 and operating
cash flow will be sufficient to satisfy future capital needs.
11
<PAGE>
Results of Operations
1999 Compared to 1998. Net earnings increased by $403,500 in 1999 from
1998. This increase was primarily due to an increase in equity earnings from
investee companies of $973,000. Such increase was partially offset by a decrease
in gains on the sale of investment land of $498,000 and an increase in other
expenses of $113,000.
Earnings from homes and homesite sales were $1,281,000 in 1999, which
compares to $1,297,000 in 1998. Earnings from homesite sales decreased in 1999
compared to 1998 due to a shift of homesite sales to Marina I. This reduction
was substantially offset by the sale of eight completed homes as compared to six
in 1998.
The Partnership recognized $2,040,000 as its share of the earnings from
Marina I in 1999, compared to $1,072,000 in 1998. Such increase results from
homesite sales of $5,829,000 in 1999 as compared to $3,447,000 in 1998.
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 having been predominantly owned by
Marina I rather than the Partnership; future homesite sales from Cambridge will
be 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 1999, the Partnership sold no commercial property held for
investment at Geist and Morse Lakes compared to a gain from such sales of
$498,000 in 1998.
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 1999 of
$35,000 compared with a loss of $81,000 in 1998. Flatfork expects minor
operating losses for the next several years.
On April 5, 1999, the Partnership made a cash distribution to the partners
of record on March 25, 1999 of $3.85 per unit of partnership interest, for a
total of $2,597,000.
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.
12
<PAGE>
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.
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.
On April 2, 1998, the Partnership made a cash distribution to the partners
of record on March 23, 1998, of $3.50 per unit of partnership interest, for a
total of $2,363,000.
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, 1999, 1998, and 1997, and the
independent auditors' reports thereon. A list of the reports and financial
statements appears in response to Item 14 of this report.
13
<PAGE>
Independent Auditors' Report
The Partners
The Marina Limited Partnership:
We have audited the accompanying balance sheets of The Marina Limited
Partnership as of December 31, 1999 and 1998, and the related statements of
earnings, partners' equity and cash flows for each of the years in the
three-year period ended December 31, 1999. 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, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Indianapolis, Indiana
February 15, 2000
14
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 8,527,375 5,960,801
Receivables from homesite sales 511,351 1,032,963
Other receivables and assets 405,400 415,867
Properties held for sale:
Homes and homesites available for sale 2,636,681 3,256,585
Land and land improvements (note 3) 976,837 941,116
----------- -----------
3,613,518 4,197,701
----------- -----------
Property and equipment (note 2):
Marine property and equipment, net 3,098,687 3,014,095
Recreational facilities, net 487,897 500,741
Commercial properties, net 2,133,992 2,301,370
----------- -----------
5,720,576 5,816,206
----------- -----------
Other investments (note 4):
Marina I 3,700,356 2,930,267
Investments in and advances to Flatfork Creek Utility 503,548 1,289,030
----------- -----------
$22,982,124 21,642,835
=========== ===========
Liabilities and Partners' Equity
Accounts payable 400,979 649,690
Accrued bonuses 157,534 104,267
Deferred revenues and sale deposits 202,148 282,161
----------- -----------
Total liabilities 760,661 1,036,118
----------- -----------
Partners' equity:
General partner - 257,952 units outstanding 8,511,679 7,894,298
Limited partners - 416,715 units outstanding 13,709,784 12,712,419
----------- -----------
Total partners' equity 22,221,463 20,606,717
----------- -----------
$22,982,124 21,642,835
=========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Earnings
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Home and homesite sales $ 5,648,667 4,222,041 2,733,459
Marine operations 5,105,899 4,784,087 3,790,502
Equity in earnings of investee
Companies (note 4) 2,004,974 1,031,830 992,234
Interest income 500,003 464,216 445,628
Rental income, net (note 6) 286,160 346,649 210,660
Recreational facilities, net 54,893 50,777 69,033
Gain on sales of investment property (note 3) -- 497,853 661,164
Gain on sale of operating assets 42,508 -- --
----------- ----------- -----------
13,643,104 11,397,453 8,902,680
----------- ----------- -----------
Costs and expenses:
Cost of homes and homesites sold
And related expenses 4,367,209 2,924,726 1,365,040
Marine operations 3,790,842 3,504,190 2,677,554
General and administrative 1,173,563 1,063,047 1,036,074
Management fees paid to general partner (note 1) 99,275 96,759 81,665
----------- ----------- -----------
9,430,889 7,588,722 5,160,333
----------- ----------- -----------
Net earnings 4,212,215 3,808,731 3,742,347
Net earnings attributable to general partner 1,610,497 1,455,304 1,115,207
----------- ----------- -----------
Net earnings attributable to limited partners $ 2,601,718 2,353,427 2,627,140
=========== =========== ===========
Weighted average number of limited
Partner units outstanding 416,715 417,144 473,947
=========== =========== ===========
Net earnings per limited partner unit $ 6.24 5.64 5.54
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Partners' Equity
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
General Limited Total
partner's partners' partners'
equity equity equity
----------- ----------- -----------
<S> <C> <C> <C>
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
Distributions to partners ($3.85 per unit) (993,116) (1,604,353) (2,597,469)
Net earnings 1,610,497 2,601,718 4,212,215
----------- ----------- -----------
Balance December 31, 1999 $ 8,511,679 13,709,784 22,221,463
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,212,215 3,808,731 3,742,347
Adjustments to reconcile net earnings to net cash
Provided by operating activities:
Depreciation of equipment 524,257 467,502 403,757
Equity in earnings of investee companies (2,004,974) (1,031,830) (992,234)
Receivables on current year's homesite sales -- (310,597) (723,283)
Collection of prior years' homesite sales 521,612 746,529 715,378
Gain on sale of operating assets (42,508) -- --
Gain on sales of investment property -- (497,853) (661,164)
Development costs (4,081,689) (2,883,491) (1,738,637)
Progress payments received from home buyers 1,215,412 777,748 --
Cost of homes and homesites sold 3,444,863 2,194,850 500,253
Change in operating assets and liabilities (264,990) 279,970 132,553
----------- ----------- -----------
Net cash provided by operating activities 3,524,198 3,551,559 1,378,970
----------- ----------- -----------
Cash flows from investing activities:
Distributions received from Marina I 1,270,367 545,463 499,467
Flatfork Creek Utility advances and repayments 750,000 (1,350,000) --
Distributions received from Dockside Cafe -- 180,899 66,532
Additions to marine property and equipment (404,986) (648,764) (753,541)
Additions to recreational facilities (62,836) (23,916) (174,788)
Additions to commercial properties -- (760) (80,387)
Proceeds from sale of operating assets 87,300 554,585 1,201,514
Maturity of U.S. Treasury note -- -- 996,875
----------- ----------- -----------
Net cash provided (used) by investing activities 1,639,845 (742,493) 1,755,672
----------- ----------- -----------
Cash flows from financing activities:
Distributions to partners (2,597,469) (2,362,973) (2,194,189)
Repurchase of limited partner units -- (16,848) --
----------- ----------- -----------
Net cash used by financing activities (2,597,469) (2,379,821) (2,194,189)
----------- ----------- -----------
Net increase in cash and cash equivalents 2,566,574 429,245 940,453
Cash and cash equivalents at beginning of year 5,960,801 5,531,556 4,591,103
----------- ----------- -----------
Cash and cash equivalents at end of year $ 8,527,375 5,960,801 5,531,556
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(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 $757,000 at December 31, 1999. In order to continue
partnership tax treatment, limited partner units are no longer
publicly traded, and buyers and sellers are required to contact the
Partnership to follow a prescribed process to transfer 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
begin.
Sales of homesites are for cash 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. Costs of
properties sold are determined by the relative sales value of the
property to the total project.
19
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
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 homesites sold.
Revenues from home 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., 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) 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.
(g) Marine Revenues
Revenues for rental and storage from the marine operations are
recognized on a straight-line basis over the term of the agreement.
(h) 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.
(i) 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.
20
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
The Partnership routinely evaluates all of its 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 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
partnership operations are summarized at December 31 as follows:
1999 1998
----------- -----------
Land and land improvements $ 1,209,637 1,214,637
Buildings and equipment 8,939,709 8,516,290
----------- -----------
10,149,346 9,730,927
Accumulated depreciation 4,428,770 3,914,721
----------- -----------
$ 5,720,576 5,816,206
=========== ===========
(3) Land and Land Improvements
At December 31, land and land improvements consisted of the following:
1999 1998
-------- --------
Unimproved land and residential land
under development $631,057 619,025
Commercial sites 345,780 322,091
-------- --------
$976,837 941,116
======== ========
(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
$2,040,456 in 1999, $1,071,502 in 1998 and $971,752 in 1997.
21
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
The following is a summary of balance sheet and operating information
(in thousands) of Marina I as of December 31, 1999 and 1998 and for
the years then ended:
1999 1998
------- -------
Cash and cash equivalents $ 2,248 1,593
Homes and homesites available for sale
and land and land improvements 3,475 3,270
Receivables from homesite sales 1,307 860
Other assets 562 414
Liabilities (245) (119)
------- -------
Partners' equity $ 7,347 6,018
======= =======
Homesite sales and other revenues 6,003 3,601
Cost of homesites sold and expenses 2,119 1,592
------- -------
Net earnings $ 3,884 2,009
======= =======
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 leased
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 restaurant buildings to Dockside Cafe.
(c) Flatfork Creek Utility, Inc.
The Partnership has a 50% investment along with Irving Materials, Inc.
in Flatfork Creek Utility, Inc. (the Corporation). The Corporation was
formed to own and operate the wastewater treatment plant to serve
homesites to be developed in the Geist Lake area by the Partnership,
Marina I and other developers.
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. Periodically the Partnership and Marina I
make advance payments for future utility hook-ups. The Partnership
recognized a loss of $35,482 in 1999, $81,451 in 1998 and income of
$20,482 in 1997 as its share of the Corporation's results of
operations.
In 1998, the Partnership advanced $1,350,000 to the Corporation. This
advance bears interest of 6.6% and is due on demand. In 1999, $750,000
of the advance was repaid by the Corporation.
22
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(5) 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 $52,849,
$76,400, and $69,600 for 1999, 1998 and 1997 sales, respectively, are
included in rental income.
The restaurant facility at Morse Lake 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 1999 and
1997.
The Partnership operates a 20,000 square foot retail and office development
known as Marina Village, and rental income was $248,132, $289,400 and
$210,600 for 1999, 1998 and 1997, respectively. At December 31, 1999,
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 $20,300, $17,800 and $15,200 in
1999, 1998 and 1997, respectively.
The minimum rent payments due under operating leases in effect at December
31, 1999 are summarized as follows:
Marina
Restaurants Village Total
----------- --------- ---------
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
2004 150,000 -- 150,000
--------- --------- ---------
$ 750,000 322,700 1,072,700
========= ========= =========
23
<PAGE>
THE MARINA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(6) 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
1999, 1998 and 1997 is as follows (in thousands):
1999 1998 1997
-------- -------- --------
Revenues:
Homes and homesites $ 5,648 4,222 2,733
Equity in earnings of homesite
investee company 2,040 1,072 962
-------- -------- --------
7,688 5,294 3,695
Marine operations 5,106 4,784 3,791
Other 849 1,319 1,417
-------- -------- --------
$ 13,643 11,397 8,903
======== ======== ========
Operating income:
Homes and Homesites sales,
including equity in earnings of
homesite investee company $ 3,321 2,370 2,330
Marine operations 1,315 1,280 1,113
Other 849 1,319 1,417
Administration (1,273) (1,160) (1,118)
-------- -------- --------
$ 4,212 3,809 3,742
======== ======== ========
Assets:
Homes and homesites sales,
including investment in
homesite investee company $ 6,925 7,222
Marine operations 3,147 3,087
Cash 8,527 5,961
Other 4,384 5,373
-------- --------
$ 22,983 21,643
======== ========
24
<PAGE>
Independent Auditors' Report
The Partners
The Marina I L. P.:
We have audited the accompanying balance sheets of The Marina I L. P. as of
December 31, 1999 and 1998, and the related statements of earnings, partners'
equity and cash flows for each of the years in the three-year period ended
December 31, 1999. 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, 1999 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Indianapolis, Indiana
February 15, 2000
25
<PAGE>
THE MARINA I L.P.
Balance Sheets
December 31, 1999 and 1998
Assets 1999 1998
---------- ----------
Cash and cash equivalents $2,248,223 1,592,822
Receivables from homesite sales 1,307,476 859,879
Other receivables and assets 20,774 48,845
Prepaid hook-up fees to Flatfork Creek Utility 540,910 365,722
Properties held for sale:
Homesites available for sale 2,173,404 1,680,380
Land and land improvements 1,301,368 1,589,830
---------- ----------
$7,592,155 6,137,478
========== ==========
Liabilities and Partners' Equity
Accounts payable and accrued expenses $ 153,030 55,761
Land sale deposits 82,400 31,700
Accounts payable to affiliates 9,700 31,650
---------- ----------
Total liabilities 245,130 119,111
---------- ----------
Partners' equity:
General partner 3,647,234 2,877,163
Limited partner 3,699,791 3,141,204
---------- ----------
Total partners' equity 7,347,025 6,018,367
---------- ----------
$7,592,155 6,137,478
========== ==========
See accompanying notes to financial statements.
26
<PAGE>
THE MARINA I L.P.
Statements of Earnings
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Homesite sales $5,829,182 3,446,500 3,056,941
Interest income 174,262 155,021 99,242
---------- ---------- ----------
6,003,444 3,601,521 3,156,183
---------- ---------- ----------
Costs and expenses:
Cost of homesites sold and related expenses 2,091,828 1,555,695 1,281,591
General and administrative 27,636 36,710 29,964
---------- ---------- ----------
2,119,464 1,592,405 1,311,555
---------- ---------- ----------
Net earnings 3,883,980 2,009,116 1,844,628
Net earnings attributable to general partner 2,040,437 1,071,502 961,813
---------- ---------- ----------
Net earnings attributable to limited partner $1,843,543 937,614 882,815
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
THE MARINA I L.P.
Statements of Partners' Equity
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
General Limited Total
partner's partner's partners'
equity equity equity
----------- ----------- -----------
<S> <C> <C> <C>
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
Distributions to partners (1,270,366) (1,284,956) (2,555,322)
Net earnings 2,040,437 1,843,543 3,883,980
----------- ----------- -----------
Balance December 31, 1999 $ 3,647,234 3,699,791 7,347,025
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
THE MARINA I L.P.
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,883,980 2,009,116 1,844,628
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Receivables on current year's homesite sales (638,933) (419,672) (551,962)
Collection on prior years' homesite sales 107,336 211,449 189,062
Development costs (1,801,427) (655,434) (528,697)
Cost of homesites sold 1,680,865 1,104,277 909,068
Change in operating assets and liabilities (21,098) (110,275) (326,355)
----------- ----------- -----------
Net cash provided by operating activities 3,210,723 2,139,461 1,535,744
----------- ----------- -----------
Cash flows from investing activities:
Land acquisition -- -- (905,317)
----------- ----------- -----------
Net cash used by investing activities -- -- (905,317)
----------- ----------- -----------
Cash flows from financing activities:
Distributions to partners (2,555,322) (1,100,000) (924,263)
----------- ----------- -----------
Net cash used by financing activities (2,555,322) (1,100,000) (924,263)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 655,401 1,039,461 (293,836)
Cash and cash equivalents at beginning of year 1,592,822 553,361 847,197
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,248,223 1,592,822 553,361
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
THE MARINA I L.P.
Notes to Financial Statements
December 31, 1999, 1998 and 1997
Summary of Significant Accounting Policies
(a) General
The Marina I L. P. was formed by The Marina Limited Partnership (TMLP), the
general partner, and Irving Materials, Inc. (Irving), the limited partner,
to develop 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 are valued at amounts agreed upon by the
partners which approximate Irving's tax basis. Earnings and distributions
are allocated as follows:
o For earnings from homesite sales of 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 begins.
Sales of homesites are for cash 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. 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 1999 and 1997, respectively, Marina I paid $372,000 and
$590,436 to Flatfork Creek Utility, Inc. as advance payments for future
utility hook-ups.
30
<PAGE>
THE MARINA I L.P.
Notes to Financial Statements
December 31, 1999, 1998 and 1997
The Partnership routinely evaluates all of its 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 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.
31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in the Partnership's independent certified public
accountants within 24 months prior to, or subsequent to, the date of the most
recent financial statements, nor has there been any disagreements with the
accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The following table presents certain information regarding the Directors
and executive officers of the General Partner. Each person listed is a Director
of the General Partner except for Mr. Bussell and Mr. Calabria. Messrs.
Rosenberg, Rosenberg II, Bussell 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
Robert K. Bussell Vice President of the General Partner 6) 1961
</TABLE>
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.
6. Mr. Bussell became Director of Sales and Marketing in July 1994 and was
elected as Vice President of the General Partner in March 1999.
32
<PAGE>
All Directors serve annual terms until their successors are elected and
have qualified. The Directors are elected by the shareholders of the General
Partner. Mr. Rosenberg has served as a Director of the Company or General
Partner since 1982. Mr. Hunt was elected as a Director in 1996 and Mr. Rosenberg
II in 1997. All other Directors were elected in 1984. All officers serve at the
pleasure of the Board of Directors. Mr. Rosenberg is the father of Mr. Rosenberg
II. There are no other family relationship between any of the executive officers
and Directors of the General Partner.
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 1999 were
timely made.
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, 1999, 1998, and 1997.
SUMMARY COMPENSATION TABLE
Name and
Principal Position Year Salary Bonus
------------------ ---- ------ -----
Allen E. Rosenberg 1999 $234,884 $154,026
President, Director of 1998 200,000 148,541
the General Partner 1997 200,000 180,667
Allen E. Rosenberg II 1999 $114,231 $ 80,000
Vice President, Assistant Treasurer 1998 110,000 100,000
and Director of the General Partner 1997 86,353 103,206
Robert K. Bussell 1999 $ 62,308 $116,925
Vice President of 1998 60,000 67,740
the General Partner 1997 60,000 74,962
Donald J. Calabria 1999 $ 95,423 $ 17,000
Treasurer and Secretary of 1998 81,742 12,000
the General Partner 1997 36,346 1) --
1) Partial year from June 1997
Each Director except Messrs. Rosenberg and Rosenberg II receives an annual fee
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. The annual fee was $5,000 through March 1999 and
increased to $7,500 commencing in April 1999. 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.
33
<PAGE>
Bonus Plans
Allen E. Rosenberg is compensated under a plan whereby three percent of the
proceeds or other revenues from sales of the Partnership's investment property
have been paid to him for his stewardship of such property. The following
payments were made pursuant to that plan:
Year Amount
---- ------
1999 $ -0-
1998 18,150
1997 39,211
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
---- ------
1999 $154,026
1998 130,391
1997 141,455
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, $80,000 was paid in 1999. Payments of
$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.
Robert K. Bussell is compensated under a plan whereby 1.5% of the sales
value of homesites is paid for his role in promoting and completing those sales.
Such payments are reflected in the "Summary Compensation Table" as bonus.
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 $99,000 in 1999, 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.
34
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership
The following table sets forth the number of Limited Partner Units of the
Partnership beneficially owned by all Directors of the General Partner and by
all Directors and officers of the General Partner as a group as of March 27,
2000.
Number of Percent
Limited Partner Units Of
Name Beneficially Owned Class
---- ------------------ -----
Patrick J. Bruggeman 15,600 3.8%
Allen E. Rosenberg 8,036 1) 1.9%
Allen E. Rosenberg II 3,166 2) 0.8%
Stanley E. Hunt 1,000 0.2%
All Directors and Officers of the
General Partner as a Group (7 Persons) 27,802 3) 6.7%
1. Includes 8,036 Units owned by Mr. Rosenberg's wife.
2. Includes 3,166 Units owned by Mr. Rosenberg II's spouse and minor children.
3. Includes 10,623 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 and increased the number of General
Partner Units by 56,764 to 257,952 units.
As of March 27, 2000 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.
35
<PAGE>
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 27, 2000 is as set forth
in the following table:)
Percentage
Shareholder Ownership
----------- ---------
Allen E. Rosenberg 47.9%
Patrick J. Bruggeman 17.2%
Allen E. Rosenberg II 16.0%
Stanley E. Hunt 2.6%
Lawrence Buell .8%
Other children of Mr. Rosenberg 15.5%
Upon the withdrawal or removal of a shareholder of the General Partner, his
or her participation in the General Partner Units will cease. Thereafter, the
General Partner Units owned by the withdrawn or removed shareholder 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.
36
<PAGE>
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 and Allen E. Rosenberg II with one vacancy currently pending
appointment. 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.
37
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) (1) Financial Statements:
The following financial statements of the Partnership and The Marina I L.P.
appear in Part II, Item 8.
Independent Auditors' Report.
Balance Sheets -- December 31, 1999 and 1998.
Statements of Earnings -- Years Ended December 31, 1999, 1998, and 1997.
Statements of Partners' Equity -- Years Ended December 31, 1999, 1998 and
1997.
Statements of Cash Flows -- Years Ended December 31, 1999, 1998 and 1997.
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)
Agreement of Limited Partnership of The Marina Limited Partnership (3)
4.1 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.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page No. or
Number Exhibit Filed With
- - ------ ------- ----------
<S> <C> <C>
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 1999 by the Partnership.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
The Marina Limited Partnership
Date: March 27, 2000 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 March 27, 2000
/s/Lawrence L. Buell
- - ------------------------
Lawrence L. Buell Director March 27, 2000
/s/Stanley E. Hunt
- - ------------------------
Stanley E. Hunt Director March 27, 2000
/s/Allen E. Rosenberg
- - ------------------------ Director and President
Allen E. Rosenberg (Principal Executive Officer) March 27, 2000
/s/Allen E. Rosenberg II Director,
- - ------------------------ Vice President and
Allen E. Rosenberg II Assistant Treasurer March 27, 2000
/s/Donald J. Calabria Vice President,
- - ------------------------ Treasurer, and Secretary
Donald J. Calabria (Principal Financial Officer) March 27, 2000
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
The Marina Limited Partnership
Date: March 27, 2000 By:
--------------------------
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 March 27, 2000
- - ------------------------
Lawrence L. Buell Director March 27, 2000
- - ------------------------
Stanley E. Hunt Director March 27, 2000
- - ------------------------ Director and President
Allen E. Rosenberg (Principal Executive Officer) March 27, 2000
Director,
- - ------------------------ Vice President and
Allen E. Rosenberg II Assistant Treasurer March 27, 2000
Vice President,
- - ------------------------ Treasurer, and Secretary
Donald J. Calabria (Principal Financial Officer) March 27, 2000
41
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803605
<NAME> THE MARINA LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,527,375
<SECURITIES> 0
<RECEIVABLES> 916,751
<ALLOWANCES> 0
<INVENTORY> 3,613,518
<CURRENT-ASSETS> 0
<PP&E> 5,720,576
<DEPRECIATION> 524,257
<TOTAL-ASSETS> 22,982,124
<CURRENT-LIABILITIES> 760,661
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,221,463
<TOTAL-LIABILITY-AND-EQUITY> 22,982,124
<SALES> 10,754,566
<TOTAL-REVENUES> 13,643,104
<CGS> 8,158,051
<TOTAL-COSTS> 9,430,889
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,212,215
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,212,215
<EPS-BASIC> 6.24
<EPS-DILUTED> 6.24
</TABLE>
