<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------------------
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: 1-10520
HEARTLAND PARTNERS, L.P.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3606475
- - --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
547 WEST JACKSON BOULEVARD, CHICAGO, ILLINOIS 60661
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
312/294-0440
- - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
Page 1 of 13
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ --------------
<S> <C> <C>
ASSETS:
Cash................................................................. $ 424 $ 44
Restricted cash...................................................... 300 0
Marketable securities (at market).................................... 4,071 5,905
Accounts receivable.................................................. 547 762
Accrued interest receivable.......................................... 69 126
Prepaid and other assets............................................. 305 257
------------ --------------
5,716 7,094
Total....................................................... ------------ --------------
Properties
Land held for sale................................................... 1,358 1,367
Land held for development............................................ 9,334 9,337
Buildings and other.................................................. 1,571 1,571
Capitalized predevelopment costs..................................... 9,354 9,194
------------ --------------
Total property............................................. 21,617 21,469
Less accumulated depreciation........................................ 749 722
------------ --------------
Net properties............................................. 20,868 20,747
------------ --------------
TOTAL ASSETS.................................................... $ 26,584 $ 27,841
============ ==============
LIABILITIES:
Accounts payable and accrued expenses................................ $ 344 $ 879
Accrued real estate taxes............................................ 1,418 1,520
Allowance for claims and liabilities................................. 2,547 2,492
Unearned rents and deferred income................................... 511 528
Other liabilities.................................................... 123 114
Note payable to Milwaukee Land Company............................... 1,073 648
------------ --------------
Total Liabilities.......................................... 6,016 6,181
------------ --------------
PARTNERS CAPITAL:
General Partner....................................................... 79 89
Class A Limited Partners - 2,142,438 units authorized, issued and
outstanding......................................................... 10,919 11,935
Class B Limited Partner............................................... 9,589 9,594
Unrealized holding (loss) gain on marketable securities............... (19) 42
------------ --------------
Total partners' capital..................................... 20,568 21,660
------------- --------------
TOTAL LIABILITIES & PARTNERS' CAPITAL................................. $ 26,584 $ 27,841
============= ==============
</TABLE>
See accompanying Notes to Condensed Financial Statements.
Page 2 of 13
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HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDING
MARCH 31, 1996 AND MARCH 31, 1995
(dollars in thousands except per unit data)
(Unaudited)
<TABLE>
<CAPTION>
March 31,
<S> <C> <C>
1996 1995
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Revenues:
Property sales....................................................................... $ 137 $ 79
Less: cost of property sales........................................................ 40 224
------------- -------------
Gross profit (loss) on property sales........................................... 97 (145)
Portfolio income..................................................................... 147 95
Rental income........................................................................ 245 259
Other revenue........................................................................ 1 0
------------- -------------
Total net revenues......................................................... 490 209
------------- -------------
Operating expenses:
Selling expenses..................................................................... 108 72
General and administrative expenses.................................................. 1,280 1,643
Depreciation and amortization........................................................ 27 37
Management fee....................................................................... 106 106
------------- -------------
Total expenses............................................................. 1,521 1,858
------------- -------------
Net Loss............................................................................. $ (1,031) $ (1,649)
============= =============
Net Loss allocated to
General Partner.................................................................... $ (10) $ (17)
============= ==============
Net Loss allocated to
Class B Limited Partner............................................................ $ (5) $ (8)
============= =============
NET Loss allocated to
Class A Limited Partners........................................................... $ (1,016) $ (1,624)
============= =============
Net Loss per Class A
Limited Partnership Unit........................................................... $ (.47) $ (.76)
============= =============
See accompanying Notes to Condensed Consolidated Financial Statements Page 3 of 13
</TABLE>A
<PAGE>
HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Cash Flow From Operating Activities:
Net loss........................................................................... $ (1,031) $ (1,649)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 27 37
(Gain) loss on sales of properties............................................ (97) 145
Proceeds from property sales.................................................. 137 79
(Gain) loss on sale of securities............................................. (55) 48
Net change in assets and liabilities:
Increase (decrease) in claims and liabilities................................. 55 265
Decrease (increase) accounts and interest receivable.......................... 272 55
(Decrease) increase accounts payable and accrued liabilities.................. (318) (80)
(Decrease) increase in management fee due MLC................................. (319) 106
Net change in other assets and liabilities.................................... (56) (36)
------------ ----------
Net Cash Flow used in operating activities......................................... (1,385) (1,030)
------------ ----------
Cash Flow From Investing Activities:
Capital expenditures including land and development costs.......................... (188) (337)
Advance on note receivable......................................................... 0 (3)
Amortization of security premium/discount.......................................... 0 (4)
Net sales and maturities of marketable securities................................. 1,828 538
------------ ----------
Net cash flow provided by investing activities..................................... 1,640 194
------------ ----------
Cash Flow From Financing Activities:
Restricted cash.................................................................... (300) 0
Note payable to affiliate.......................................................... 425 0
------------ ----------
Cash flow provided by financing activities......................................... 125 0
------------ ----------
Increase (decrease) in cash........................................................ 380 (836)
Cash at December 31, 1995 and 1994................................................. 44 1,075
------------ ----------
Cash at March 31, 1996 and 1995................................................... $ 424 $ 239
============ ==========
See accompanying Notes to Condensed Consolidated Financial Statements Page 4 of 13
</TABLE>
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements include the accounts
of Heartland Partners, L.P. ("Heartland"); CMC Heartland Partners ("CMC"), its
99.99% owned operating partnership; Heartland Development Corporation, 100%
owned by Heartland; and CMC Heartland Partners I, Limited Partnership, 1%
general partnership interest owned by Heartland Development Corporation and 99%
owned by CMC, (collectively, the "Company").
All adjustments which are in the opinion of management necessary to fairly
present the financial statements have been made and are of a normal recurring
nature. The results of operations for the quarter ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the previously reported 1995
statements in order to provide comparability with the 1996 interim statements.
These reclassifications have not changed the 1995 results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, the unaudited condensed
consolidated financial statements should be read in connection with Heartland's
audited consolidated financial statements for the fiscal year ended December 31,
1995, including the notes thereto.
2. CONTINGENCIES
Heartland assumed primary responsibility and liability for the resolution and
satisfaction of most of the liabilities for claims remaining under the plan of
reorganization of the predecessor of CMC Real Estate Corporation ("CMCRE"),
formerly a wholly-owned subsidiary of Chicago Milwaukee Corporation ("Chicago
Milwaukee"), and previously named the Chicago, Milwaukee, St. Paul and Pacific
Railroad Company (the "Railroad")), certain contingent liabilities with respect
to the real estate properties conveyed to Heartland, and the costs and expenses
incurred in connection with such claims and other contingent liabilities
(collectively, the "Heartland Assumed Liabilities").
It is Heartland's practice to evaluate environmental liabilities associated with
certain of its properties on a regular basis. An allowance is provided with
regard to potential environmental liabilities, including remediation, legal and
consulting fees, and government oversight, when it is probable that a liability
has been incurred and the amount of the liability can be reasonably estimated.
The amount of any liability is evaluated independently from any claim for
recovery. If the amount of the liability cannot be reasonably estimated but
management is able to determine that the amount of the liability is likely to
fall within a range, and no amount within that range can be determined to be the
better estimate, then an allowance in the minimum amount of the range is
established. Environmental costs which are incurred in connection with
Heartland's development activities are expensed or capitalized as appropriate.
Page 5 of 13
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HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(UNAUDITED)
MARCH 31, 1996
Estimates which are used as the basis for allowances for the remediation of a
particular site are taken from evaluations of the range of potential costs for
that site made by independent consultants. These evaluations are estimates
based on professional experience but necessarily rely on certain significant
assumptions including the specific remediation standards and technologies which
may be required by an environmental agency as well as the availability and cost
of subcontractors and disposal alternatives.
There is not sufficient information to reasonably estimate all the environmental
liabilities of which management is aware. Accordingly, management is unable to
determine whether environmental liabilities which management is unable to
reasonably estimate will or will not have a material effect on Heartland's
results of operations or financial condition.
At March 31, 1996, Heartland's allowance for claims and liabilities was
approximately $2.5 million of which $2.1 million was for potential environmental
costs and $.4 million was for resolution of non-environmental claims resulting
from the reorganization of the Railroad.
3. RESTRICTED CASH
On March 15, 1996, CMC signed a line of credit agreement in the amount of $3
million with LaSalle National Bank ("LNB"), pursuant to which CMC granted LNB a
first lien on certain parcels of land in Chicago, IL and pursuant to which CMC
pledged cash in the amount of $300,000 as an interest reserve. Advances against
the line of credit bear interest at the prime rate of LNB plus 1.0% (9.25% at
March 15, 1996). The agreement terminates on March 14, 1997 at which time all
outstanding advances and any accrued interest must be paid. Under the terms of
the agreement, CMC is required to maintain a minimum net worth in excess of $17
million, liquid assets in excess of $1 million, is limited in incurring
additional indebtedness and restricted from making certain distributions. At
March 31, 1996, no advances have been made against the line of credit.
Page 6 of 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash flow for operating activities has been derived primarily from proceeds of
property sales, rental income and portfolio income. Cash and marketable
securities at market (excluding restricted cash) approximated $4.5 million at
March 31, 1996. This is a decrease of approximately $1.5 million from December
31, 1995. This decrease is comprised of a $380,000 increase in cash and a
$1,834,000 net decrease in marketable securities.
Cash flow used in operating activities was $1,385,000 for the first quarter of
1996 compared to $1,030,000 for the first quarter of 1995. The increase of
$355,000 in cash flow used in operating activities for 1996 is primarily due to
the payment of $425,000 to Milwaukee Land Company for the management fee due
affiliate, offset be the $58,000 increase in the proceeds from property sales..
Proceeds from property sales provided cash flow of $137,000 for the first
quarter of 1996 compared to $79,000 for the first quarter of 1995. First
quarter 1996 sales include $39,000 for one of the two remaining lots at the
Willow Bluff development in Hartland, WI. As of March 15, 1996 CMC had signed
contracts and received earnest money for the sale of three major parcels. These
contracts total approximately $5.5 million and contain various conditions to
closing. Management anticipates that these sale contracts will close in 1996;
one in the second quarter and the other two in the third or fourth quarter.
Management is estimating the closing of $950,000 in sales for the second quarter
of which $770,000 is one of the sales under contract referred to above. However
there can be no assurance as some of the conditions are outside of the control
of the Company.
As of March 31, 1996, Heartland had approximately $4.0 million (fair value)
invested in marketable securities. Of this amount, $2.5 million (63%) was
invested in U.S. Treasuries, $1.1 million (28%) was invested in non-investment
grade corporate bonds rated B or better and $0.4 million (9%) was invested in
U.S. government secured mortgage notes.
Portfolio income is derived from the investment of cash not required for
operating activities ("excess cash") in various U. S. government and corporate
obligations. Portfolio income for the first quarter of 1996 was $147,000
compared to $95,000 for the similar period of 1995. The increase in portfolio
income for the first quarter of 1996 as compared to the first quarter of 1995 is
due to the inclusion of a $55,000 gain on the sale of marketable securities in
the portfolio income for 1996. Portfolio income for 1995 includes a loss on the
sale of marketable securities of $48,000. Net of any gain or loss on sale of
securities, portfolio income for the first quarter of 1996 was $51,000 less than
portfolio income for the same quarter of 1995. This decrease in portfolio
income is due to a decrease in interest income resulting from a decrease in cash
available for investment.
Heartland has approximately 200 active leases on its real estate properties,
which generated $245,000 of revenue in the first quarter of 1996 compared to
$259,000 in the first quarter of 1995.
At March 31, 1996, Heartland had designated 22 sites, or 950 acres with a book
value of $9,334,000, for development. Capitalized expenditures at these sites
were $188,000 for the first quarter of 1996 and $337,000 for the same period in
1995. At March 31, 1996, capitalized costs on development properties
Page 7 of 13
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totaled $9.4 million. Expenditures which significantly increase the value and
are directly identified to a specific project are capitalized.
At March 31, 1996, the land held for sale is comprised of approximately 16,750
acres with a book value of approximately $1.4 million. It will be disposed of
in an orderly fashion. Currently, the Company does not foresee disposing of all
of the land before the end of 1998.
It is the Company's practice to evaluate environmental liabilities associated
with the Company's properties. Heartland monitors the potential exposure to
environmental costs on a regular basis and has recorded a liability in the
amount of $2.1 million at March 31, 1996 for possible environmental liabilities,
including remediation, legal fees, consulting fees and governmental oversight.
A reserve is established with regard to potential environmental liabilities when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The amount of any liability is
determined independently from any claim for recovery. If the amount of the
liability cannot be reasonably estimated, but management is able to determine
that the amount of the liability is likely to fall within a range, and no amount
within that range can be determined to be the better estimate, then a reserve in
the minimum amount of the range is accrued. Heartland does not have sufficient
information to estimate the extent of each environmental liability known to
management.
Heartland continues to be responsible for the resolution of the Heartland
Assumed Liabilities, totaling $2.5 million at March 31, 1996. The Heartland
Assumed Liabilities are comprised of $2.1 million for potential environmental
costs (see preceding paragraph) and $.4 million for resolution of non-
environmental claims resulting from the reorganization of the Railroad.
Heartland does not at this time anticipate that these claims or assessments
which Heartland can reasonably estimate will have a material effect on the
Company's liquidity, financial position and results of operations beyond the
reserve which the Company has established for such claims and assessments. In
making this evaluation, the Company has assumed that the resolution of current
pending and threatened claims and assessments will be consistent with the
Company's experience with similar previously asserted claims and assessments.
While the timing of the payment in respect of environmental claims has not
significantly adversely effected the Company's cash flow or liquidity in the
past, management is not able to reasonably anticipate whether future payments
may or may not have a significant adverse effect in the future.
Heartland's management anticipates the necessity of utilizing outside financing
to fund development projects. On March 15, 1996, CMC signed a line of credit
agreement in the amount of $3 million with LaSalle National Bank ("LNB"),
pursuant to which CMC granted LNB a first lien on certain parcels of land in
Chicago, IL and pursuant to which CMC pledged cash in the amount of $300,000 as
an interest reserve. Advances against the line of credit bear interest at the
prime rate of LNB plus 1.0% (9.25% at March 15, 1996). The agreement terminates
on March 14, 1997 at which time all outstanding advances and any accrued
interest must be paid. Under the terms of the agreement, CMC is required to
maintain a minimum net worth in excess of $17 million, liquid assets in excess
of $1 million, is limited in incurring additional indebtedness and restricted
from making certain distributions. As of March 31, 1996, no advances have been
made against the line of credit.
Page 8 of 13
<PAGE>
RESULTS OF OPERATIONS
For the quarter ended March 31, 1996, operations resulted in a loss of
$1,031,000 or $.47 per Class A Unit. Operations for the quarter ended March 31,
1995 resulted in loss of $1,649,000 or $.76 per Class A Unit.
Proceeds from property sales provided cash flow of $137,000 for the first
quarter of 1996 compared to $79,000 for the first quarter of 1995. First
quarter 1996 sales include $39,000 for one of the two remaining lots at the
Willow Bluff development in Hartland, WI. As of March 15, 1996 CMC had signed
contracts and received earnest money for the sale of three major parcels. These
contracts total approximately $5.5 million and contain various conditions to
closing. Management anticipates that these sale contracts will close in 1996;
one in the second quarter and the other two in the third or fourth quarter.
Management is estimating the closing of $950,000 in sales for the second quarter
of which $770,000 is one of the sales under contract referred to above. However
there can be no assurance as some of the conditions are outside of the control
of the Company.
Portfolio income is derived from the investment of excess cash in various U. S.
government and corporate obligations. Portfolio income for the first quarter of
1996 was $147,000 compared to $95,000 for the similar period of 1995. The
increase in portfolio income for the first quarter of 1996 as compared to the
first quarter of 1995 is due to the inclusion of a $55,000 gain on the sale of
marketable securities in the portfolio income for 1996. Portfolio income for
1995 includes a loss on the sale of marketable securities of $48,000. Net of
any gain or loss on sale of securities, portfolio income for the first quarter
of 1996 was $51,000 less than portfolio income for the same quarter of 1995.
This decrease in portfolio income is due to a decrease in interest income
resulting from a decrease in cash available for investment.
Heartland has approximately 200 active leases on its real estate properties,
which generated $245,000 of revenue in the first quarter of 1996 compared to
$259,000 in the first quarter of 1995.
Total expenses for the first quarter of 1996 were $1,521,000 compared to
$1,858,000 for the first quarter of 1995, a decrease of $337,000. This decrease
is primarily due to a decrease in environmental expenses.
Page 9 of 13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS AND CONTINGENCIES
At March 31, 1996, Heartland's allowance for claims and liabilities was
approximately $2.5 million. During the quarter ended March 31, 1996, a $130,000
provision was recorded in respect of environmental matters.
Certain litigation, government agency notice or private notice may have been
directed to Chicago Milwaukee due to historical events connected with the
operation of the Railroad. Although such litigation or notice may name Chicago
Milwaukee, the Company, as part of the Heartland Assumed Liabilities, has
assumed any liability and will receive any recovery which may arise out of such
matters. Any such matters which are material are discussed below.
Soo Line Matters
----------------
In April 1990, the Soo Line Railroad Company (the "Soo") filed suit against
Chicago Milwaukee and CMCRE in the United States District Court for the Northern
District of Illinois, asserting claims for certain accounts and disputes arising
out of the sale of certain assets to the Soo pursuant to an Asset Purchase
Agreement and related agreements ("APA"). Certain of these matters were settled
in 1994, with the Company's payment of $153,120 to the Soo. Judgment on the
remainder of the claims was against the Soo in July 1995, for which Soo paid the
Company $339,368 in November, 1995. Subject to documentation, the Company and
the Soo have tentatively agreed to settle the Company's additional claims for
attorney's fees and pre-judgment interest by the Soo's payment to the Company of
$100,000.
Outside the litigation, Soo has asserted that the Company is liable for certain
occupational injury claims filed after the consummation of the APA by former
Railroad employees now employed by the Soo. The Company has denied liability
for each of these claims based on a prior settlement with the Soo, in which the
Soo agreed to accept liability for occupational disease claims of former
Railroad employees. Soo has also asserted that the Company is liable for the
remediation of releases of petroleum or other regulated materials at six
different sites located in Iowa, Minnesota and Wisconsin. The Company has
denied liability based on the contracts between the parties.
The occupational and environmental claims are all currently being handled by the
Soo, and the Company understands the Soo has paid settlements in many of these
claims. As a result of Soo's exclusive handling of these matters, the Company
has made no determination as to the merits of the claims and is unable to
determine the materiality of these claims.
Tacoma, Washington
------------------
In November 1991, the Company moved the United States District Court for the
Northern District of Illinois, which acted as the reorganization court for the
reorganization of the Railroad (the "Reorganization Court") to bar claims
asserted by the Union Pacific Railroad Company ("Union Pacific") arising out of
a 1980 sale by the Railroad reorganization trustee of a rail yard in Tacoma,
Washington to
Page 10 of 13
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Union Pacific. Union Pacific asserted claims against the Company for a variety
of actions under the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA"), state law and the sale contract. Later in
November 1991, Union Pacific filed suit in the United States District Court for
the Western District of Washington asserting essentially the same claims which
the Company moved the Reorganization Court to bar. The litigation in Washington
has been stayed pending resolution of the Company's motion to bar Union
Pacific's claims before the Reorganization Court.
On August 18, 1993, the United States Court of Appeals for the Seventh Circuit
affirmed the bar with respect to Union Pacific's claims under CERCLA and
remanded the matter back to the Reorganization Court for further findings with
respect to Union Pacific's claims under state law. On February 28, 1996, the
Seventh Circuit held that the Union Pacific's claim under Washington
environmental law was not barred by the Railroad's reorganization and
subsequently denied the Company's motion for rehearing. The Company is
preparing a petition for Writ of Certiorari to the United States Supreme Court.
A draft feasibility study dated November 1994, submitted to the Washington
Department of Ecology on behalf of a proposed purchaser of the site estimates
that the selected remedial alternative for a portion of the site may cost
approximately $3.65 million.
Management is not able to reasonably predict the outcome of this matter or, in
the event of an adverse outcome, to reasonably estimate the amount of the
Company's liability. Accordingly, management has only recorded a reserve in the
amount of estimated attorney fees. Management believes it has meritorious
defenses in this matter and intends to pursue them vigorously.
Cook County, Illinois Tax Issue
-------------------------------
By undated letters delivered to the Company on March 1, 1996, the Office of the
Assessor of Cook County, Illinois gave notice that the Assessor intended to levy
back taxes on certain of the Company's properties due to alleged previously
untaxed assessments. The letters did not provide the amount of the alleged
additional tax amounts due. Management believes it has meritorious defenses in
this matter and intends to pursue them vigorously.
Miscellaneous Environmental Matters
-----------------------------------
The Company has known environmental liabilities associated with certain of its
properties arising out of the activities of the Railroad or certain of the
Railroad's lessees and may have further material environmental liabilities as
yet unknown. The majority of the Company's known environmental liabilities stem
from the use of petroleum products, such as motor oil and diesel fuel, in the
operation of a railroad or in operations conducted by Railroad lessees. The
following is a summary of material, known environmental matters, in addition to
those described above.
At eleven separate sites, the Company has been notified that releases arising
out of the operations of a lessee, former lessee or other third party have been
reported to government agencies. At each of these sites, the third party is
voluntarily cooperating with the appropriate agency by investigating the extent
of any such contamination and performing the appropriate remediation, if any.
The Company has petroleum groundwater remediation projects underway at Austin,
Minnesota, Miles City, Montana, and Milwaukee, Wisconsin.
In December 1989, the Minnesota Pollution Control Agency added a site which
includes the Company's Pig's Eye Yard site in St. Paul, Minnesota to its
Permanent List of Priorities based on historical records and an initial
investigation of soil and groundwater conditions adjacent to Pig's Eye Yard.
Portions of
Page 11 of 13
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this site had been leased to the City of St. Paul for a landfill and
to the Metropolitan Waste Control Commission for disposal of incinerator ash.
The site, which includes portions of the adjacent municipal waste water
treatment plant, was placed on the Superfund Accelerated Clean Up Model list in
1993. No potentially responsible parties ("PRPs") have been named at this site.
The Company has an interest in property at Moses Lake, Washington previously
owned and used by the United States government as an Air Force base. The Army
Corps of Engineers is performing sampling for materials which the Air Force may
have released during its operation of the base. Preliminary testing has
indicated the presence of various regulated materials, primarily in the
groundwater, which were most likely released as a result of military or other
third party operations. A portion of the Company's property is located over the
well field which was placed on the national priority list in October 1992. No
PRPs have been named at this site.
In addition to the environmental matters set forth above, there may be other
properties, i), with environmental liabilities not yet known to the Company, or
ii), with potential environmental liabilities for which the Company has no
reasonable basis to estimate or, iii), which the Company believes the Company is
not reasonably likely to ultimately bear the liability, but the investigation or
remediation of which may require future expenditures. Management is not able to
express an opinion at this time whether the environmental expenditures for these
properties will or will not be material.
The Company has given notice to the Railroad's insurers of certain of the
Company's environmental liabilities. Due to the high deductibles on these
policies, the Company has not yet demanded that any insurer indemnify or defend
the Company. Consequently, management has not formed an opinion regarding the
legal sufficiency of the Company's claims for insurance coverage.
The Company is also subject to other suits and claims which have arisen in the
ordinary course of business. In the opinion of management, reasonably possible
losses from these matters should not be material to the Company's results of
operations or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K; No report on Form 8-K was filed during the quarter
ended March 31, 1996.
Page 12 of 13
<PAGE>
HEARTLAND PARTNERS, L.P.
MARCH 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEARTLAND PARTNERS, L.P.
(Registrant)
Date: May 15, 1996 By: /s/ Edwin Jacobson
-----------------------------------------
President and Chief Executive Officer
Milwaukee Land Company,
General Partner
Date: May 15, 1996 By: /s/ Leon F. Fiorentino
-----------------------------------------
Vice President-Finance, Secretary and
Treasurer of
Milwaukee Land Company,
General Partner
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the financial statements contained in the body of the accompanying Form 10-Q and
is qualified in its entirety by reference to such financial statements.</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 424
<SECURITIES> 4,071
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,617
<DEPRECIATION> 749
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0
0
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