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 June 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-10520
HEARTLAND PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 36-3606475
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
330 North Jefferson Court, Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
312/575-0400
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(Registrant's telephone number, including area code)
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(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
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1
HEARTLAND PARTNERS, L.P.
June 30, 2001
INDEX
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets...............................3
Consolidated Statements of Operations.....................4
Consolidated Statements of Cash Flows.....................5
Notes to Consolidated Financial Statements................6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................13
Item 3 Quantitative and Qualitative Disclosure About Market Risk..... 20
PART II. OTHER INFORMATION
Item 1 Legal Proceedings..............................................21
Item 6 Exhibits and Reports on Form 8-K...............................24
Signatures...............................................25
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEARTLAND PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(amounts in thousands)
June 30, December 31,
2001 2000
(Unaudited) (Audited)
------------ ------------
Assets:
Cash $ 1,662 $ 150
Restricted cash 1,902 2,699
Accounts receivable (net) 1,023 582
Due from affiliate 6,929 4,581
Prepaid and other assets 283 279
Investment in joint venture 427 377
------------ ------------
Total 12,226 8,668
------------ ------------
Property:
Land, buildings and other $ 2,690 $ 2,683
Less accumulated depreciation 188 137
------------ ------------
Net land, buildings and other 2,502 2,546
Land held for sale 732 740
Housing inventories 14,832 20,354
Land held for development 4,817 5,497
Capitalized predevelopment costs 8,912 9,779
------------ ------------
Net properties 31,795 38,916
------------ ------------
Total Assets $ 44,021 $ 47,584
============ ============
Liabilities:
Notes payable $ 10,704 $ 14,675
Accounts payable and accrued
expenses 3,115 7,267
Accrued real estate taxes 638 776
Allowance for claims and liabilities 4,324 4,478
Unearned rents and deferred income 1,581 1,632
Other liabilities 2,737 3,260
------------ ------------
Total Liabilities 23,099 32,088
------------ ------------
Partners' Capital:
General Partner $ 81 $ 27
Class A Limited Partners - 2,142 units
authorized, issued and outstanding 11,251 5,906
Class B Limited Partner 9,590 9,563
------------ ------------
Total Partners' Capital 20,922 15,496
------------ ------------
Total Liabilities and Partners'
Capital $ 44,021 $ 47,584
============ ============
See accompanying notes to consolidated financial statements.
3
HEARTLAND PARTNERS, L. P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND SIX MONTHS ENDED
JUNE 30, 2001 AND 2000
(amounts in thousands except per unit data)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Income:
Property sales $ 11,043 $ 19,844 $ 21,253 $ 22,494
Less: Cost of property sales 6,605 14,384 13,608 16,978
--------- --------- --------- ---------
Gross profit on property sales 4,438 5,460 7,645 5,516
--------- --------- --------- ---------
Operating Expenses:
Selling expenses 920 814 1,899 1,401
General and administrative
expenses 448 796 971 1,330
Real estate taxes 93 23 117 45
Environmental expenses 22 56 41 133
--------- --------- --------- ---------
Total operating expenses 1,483 1,689 3,028 2,909
--------- --------- --------- ---------
Net operating income 2,955 3,771 4,617 2,607
Other Income and (Expenses):
Portfolio income 262 78 632 132
Rental income 104 210 195 368
Other income 43 224 245 304
Depreciation (26) (48) (51) (95)
Management fee (106) 0 (212) 0
--------- --------- --------- ---------
Total other income 277 464 809 709
--------- --------- --------- ---------
Net income $ 3,232 $ 4,235 $ 5,426 $ 3,316
========= ========= ========= =========
Net income allocated to
General Partner $ 32 $ - $ 54 $ -
========= ========= ========= =========
Net income allocated to
Class B Limited Partner $ 16 $ 4,235 $ 27 $ 3,316
========= ========= ========= =========
Net income allocated to
Class A Limited Partner $ 3,184 $ - $ 5,345 $ -
========= ========= ========= =========
Net income per Class A
Limited Partnership Unit $ 1.49 $ - $ 2.50 $ -
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
4
HEARTLAND PARTNERS, L. P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(amounts in thousands)
(Unaudited)
June 30, June 30,
2001 2000
------------ ------------
Cash Flow from Operating Activities:
Net income $ 5,426 $ 3,316
Adjustments reconciling net income
to net cash from operating activities:
Equity in earnings of joint venture (50) (125)
Depreciation 51 95
Net change in allowance for claims and liabilities (154) 47
(Increase) decrease in accounts receivable (441) 216
Increase in due from affiliate (2,348) (1,446)
Decrease in housing
inventories, net 5,522 272
Decrease in land held for sale 8 6
Decrease in land held for development 680 46
Decrease (increase) in capitalized
predevelopment costs 867 (477)
Decrease in accounts payable and
accrued expenses (4,152) (2,156)
Net change in other assets and liabilities (716) (563)
------------ ------------
Net cash provided by (used in) operating
activities 4,693 (769)
------------ ------------
Cash Flow from Investing Activities:
(Additions to) sales of land, buildings and other (7) 462
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Net cash (used in) provided by investing activities (7) 462
------------ ------------
Cash Flow from Financing Activities:
(Repayments) advances on notes payable, net (3,971) 223
Decrease (increase) in restricted cash 797 (45)
------------ ------------
Net cash (used in) provided by financing
activities (3,174) 178
------------ ------------
Increase (decrease) in cash 1,512 (129)
Cash at beginning of the period 150 230
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Cash at end of the period $ 1,662 $ 101
============ ============
See accompanying notes to consolidated financial statements.
5
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
These unaudited Consolidated Financial Statements of Heartland Partners,
L.P., a Delaware Limited Partnership, and its subsidiaries (collectively,
"Heartland" or the "Company"), have been prepared pursuant to the Securities
and Exchange Commission ("SEC") rules and regulations and should be read in
conjunction with the financial statements and notes thereto included in the
Company's 2000 Annual Report on Form 10-K (the "2000 Form 10-K"). The
following Notes to Consolidated Financial Statements highlight significant
changes to the Notes included in the 2000 Form 10-K and present interim
disclosures as required by the SEC. The accompanying Consolidated Financial
Statements reflect in the opinion of management all adjustments necessary for
a fair presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature. Certain reclassifications
have been made to the prior periods' financial statements in order to conform
with current period presentation.
1. Summary of Significant Accounting Policies
Consolidation
Heartland was formed on October 6, 1988. Heartland's existence will continue
until December 31, 2065, unless extended or dissolved pursuant to the
provisions of Heartland's partnership agreement.
Heartland was organized to engage in the ownership, purchasing, development,
leasing, marketing, construction and sale of real estate properties. CMC
Heartland Partners ("CMC") is an operating general partnership owned 99.99%
by Heartland and .01% by Heartland Technology, Inc. ("HTI"), formerly known
as Milwaukee Land Company ("MLC"). HTI is the general partner of Heartland
(in such capacity, the "General Partner"). In July, 1993, Heartland
Development Corporation ("HDC"), a Delaware corporation, wholly-owned by
Heartland, formed CMC Heartland Partners I, Limited Partnership ("CMCLP"), a
Delaware limited partnership, to undertake a planned housing development in
Rosemount, Minnesota ("Bloomfield or Rosemount"). CMC has a 100% membership
interest in CMC Heartland Partners I ("CMCI"), CMC Heartland Partners II
("CMCII"), CMC Heartland Partners III ("CMCIII"), CMC Heartland Partners IV
("CMCIV"), CMC Heartland Partners V ("CMCV"), CMC Heartland Partners VI
("CMCVI"), CMC Heartland Partners VII ("CMCVII") and CMC Heartland Partners
VIII ("CMCVIII"). CMCI has been formed to develop a portion of the Kinzie
Station property ("Kinzie Station Phase II") in Chicago, IL. CMCII was formed
to participate in the Goose Island Industrial Park joint venture in Chicago,
Illinois. CMCIII was formed in 1997 to develop a portion of the Kinzie
Station property ("Kinzie Station Phase I") in Chicago, IL. CMCIV was formed
in 1998 and is developing approximately 177 acres in Fife, Washington. CMCV
was formed in 1996 to acquire finished lots, sell and construct homes in
Osprey Cove ("Osprey"), a master-planned residential community in St. Marys,
GA. CMCVII was formed in 1998 to acquire lots and engage in sales, marketing
and construction of homes in the Longleaf Country Club, Southern Pines, NC
("Southern Pines or Longleaf"). CMCVI and CMCVIII were formed at various
times to acquire and hold future acquisitions. CMC also owns 100% of the
6
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
common stock of Lifestyle Communities, Ltd. ("LCL") which serves as the
exclusive sales agent in the St. Marys, Southern Pines and Kinzie Station
Phase I and II developments. LCL is also the general contractor in the St.
Marys development. CMC owns 100% of the stock of Lifestyle Construction
Company, Inc. ("LCC") which serves as the general contractor in North
Carolina. Except as otherwise noted herein, references herein to "Heartland"
or the "Company" include CMC, HDC, CMCLP, CMCI, CMCII, CMCIII, CMCIV, CMCV,
CMCVI, CMCVII, CMCVIII, LCL and LCC. The consolidated financial statements
include the accounts of Heartland. All intercompany transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Revenue Recognition
Revenues from housing and land sales are recognized in the period which title
passes and cash is received.
Investment in Joint Venture
Investment in joint venture represents recording of the Company's interest
under the equity method of accounting. Under the equity method of
accounting, the Company recorded its initial interest at cost and adjusts its
investment account for additional capital contributions, distributions and
its share of joint venture income or loss.
Segment Reporting
The Company has two primary reportable business segments, which consist of
land sales and property development (See Note 5 to the Consolidated Financial
Statements).
Property
Properties are carried at their historical cost. Expenditures which
significantly improve the values or extend useful lives of the properties are
capitalized. Predevelopment costs including interest, financing fees, and
real estate taxes that are directly identified with a specific development
project are capitalized. Repairs and maintenance are charged to expense as
incurred.
7
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
Housing inventories, (including completed model homes), consisting of land,
land development, direct and indirect construction costs and related
interest, are recorded at cost which is not in excess of fair value.
Housing inventories consisted of the following at June 30, 2001 (amounts in
thousands):
Land under development............... $ 4,657
Direct construction costs............ 5,813
Capitalized project costs............ 4,362
-------
$14,832
=======
In December, 1999, Heartland decided to cease building operations in Osprey
Cove. The homes and lots are being sold in the ordinary course of business.
2. Contingencies
At June 30, 2001, Heartland's allowance for claims and liabilities was
approximately $4.3 million of which $0.3 million was for the resolution of
non-environmental claims and $4 million was for environmental matters.
Significant legal proceedings and contingencies are discussed in the 2000
Form 10-K. On July 15, 1999 and again on February 20, 2001, the Company
modified its October 1, 1998 settlement agreement with the Port of Tacoma in
which the Port of Tacoma released all claims against the Company and the
Company agreed either to (a) pay $1.1 million on or before December 31, 2001,
plus interest from January 1, 1999, or (b) convey real property to be agreed
upon at a later date.
On December 2, 2000, the Redevelopment Authority of the City of Milwaukee
("RACM") filed suit in Milwaukee County Circuit Court to obtain access to
appraise, survey and conduct environmental and geo-technical investigations
on certain property owned by the Company adjacent to the Milwaukee Brewers
baseball stadium in furtherance of RACM's efforts to acquire the property by
condemnation. Heartland has vigorously opposed certain elements of RACM's
request for access and right to proceed. Management is not able to express
an opinion at this time as to the merits of this action.
As part of the Company's sale of certain property in Milwaukee, Wisconsin to
the State of Wisconsin, in December, 2000, for $1,400,000, the Company
undertook to cause a lessee of part of the property to surrender its lease.
By Settlement Agreement dated July 5, 2001, the lessee agreed to surrender
its lease in consideration, among other things, of the payment from the
Company of $126,000. This amount was paid to the lessee in July, 2001.
8
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
3. Notes Payable
Heartland has a line of credit agreement in the amount of $9.6 million with
LaSalle National Bank ("LNB"), pursuant to which Heartland granted LNB a
first lien on certain parcels of land in Chicago, Illinois, Milwaukee,
Wisconsin and Fife, Washington which had a carrying value of $12,878,000 and
$11,328,000 as of June 30, 2001 and December 31, 2000, respectively. The
Company has also pledged as collateral its interest in the Goose Island Joint
Venture which has a carrying value of $427,000 and $377,000 at June 30, 2001
and December 31, 2000, respectively. Also, pursuant to the line of credit
agreement, Heartland has pledged cash in the amount of $1,150,000 as an
interest reserve. The maturity date of the line of credit is December 31,
2001. Advances against the line of credit bear interest at the prime rate of
LNB plus 1.5% (8.25% at June 30, 2001). At June 30, 2001 and December 31,
2000, $6,600,000 and $9,000,000, respectively, had been advanced to the
Company by LNB against the line of credit.
At Osprey Cove in St. Marys, Georgia, the First National Bank of St. Marys
("FNB") in Georgia has made two loans on two inventory homes of $170,000 and
$235,000 to the Company. The carrying value of the two homes is
approximately $558,000 at June 30, 2001. The loans mature on October 12,
2001 and January 5, 2002, respectively. The loans bear interest at the
London Interbank Offering Rate plus 3.35% and 3.85%, respectively (7.1% and
7.6% at June 30, 2001). At June 30, 2001, $405,000 had been advanced to
Heartland on the two loans.
As of December 8, 2000, Heartland has an agreement for a $3,000,000 revolving
line of credit for the construction of homes in its Longleaf community
located in Southern Pines, NC with Bank One of Illinois ("Bank One"). Also,
on December 8, 2000, Heartland borrowed $250,000 from Bank One to purchase
the remaining lots owned by the developer of Longleaf. The carrying value of
the collateral for these two loans at June 30, 2001 and December 31, 2000, is
$3,167,000 and $3,577,000, respectively. The line of credit and the $250,000
loan mature April 12, 2002 and bear interest at the prime rate (6.75% at June
30, 2001). At June 30, 2001 and December 31, 2000, $1,199,000 and
$1,383,000, respectively, had been advanced by Bank One to Heartland on these
two loans.
On January 30, 2001, the final principal and interest payment was made on the
$5,250,000 Kinzie Station Plaza building loan. On February 23, 2001, the
Company amended this loan agreement with Bank One, and borrowed an additional
$3,000,000, of which $2,500,000 remains outstanding at June 30, 2001, and
changed the maturity date of the loan to February 23, 2002. The loan bears
interest at the prime rate (6.75% at June 30, 2001).
9
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
4. Related Party Transactions
Heartland has a management agreement with Heartland Technology, Inc. ("HTI")
pursuant to which Heartland is required to pay HTI an annual management fee
in the amount of $425,000 until June 27, 2005. The management fee for the
first six months of 2001 of $212,000 has been accrued as an expense and was
credited against amounts owed the Company by HTI.
Under a management services agreement, HTI reimburses Heartland for
reasonable and necessary costs and expenses for services. These totaled
$460,000 for the six months ended June 30, 2001. Heartland also makes cash
advances to HTI. HTI owed the Company $6,929,000 and $4,581,000 as of June
30, 2001 and December 31, 2000, respectively, related to these expenses and
cash advances. On December 29, 2000, HTI executed a line of credit promissory
note that is due on demand, payable to Heartland in the amount of $6,000,000.
At that time, HTI granted the Company a Series C Warrant that entitles
Heartland to purchase 320,000 shares of HTI common stock at an exercise price
of $1.05. The warrant is exercisable on or before February 16, 2006. On May
11, 2001, HTI executed an additional line of credit promissory note in the
amount of $1,000,000. On July 3, 2001, the $1,000,000 promissory note was
cancelled and a replacement line of credit promissory note in the amount of
$1,500,000 was executed. The line of credit promissory notes bear interest
at 13% on June 30, 2001. The total of the two line of credit promissory
notes is $7,500,000. As collateral for these two notes, HTI Class B, LLC
pledged, on December 14, 2000, to Heartland a senior lien and a senior
security interest in the Heartland Class B Limited Partnership Interest owned
by HTI Class B, LLC.
On March 31, 2001, the two Kinzie Station Phase I model homes (a one bedroom
unit and a two bedroom unit) and furniture were purchased by two officers of
the Company at fair market value. Heartland has leased these model homes
back from the officers starting April 1, 2001 and ending April 1, 2004. The
monthly rent on the one bedroom model is $2,350 and on the two bedroom model
is $4,200. The leases contain standard insurance and maintenance clauses as
customary in these types of leases.
10
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
5. Reportable Segments
The following table sets forth the reconciliation of net income for
Heartland's reportable segments for the quarters ended June 30, 2001, and
2000 (See Note 1 to the Consolidated Financial Statements).
Property
Land Sales (1) Development (2) Corporate (3) Consolidated
(amounts in thousands) Quarter Ended Quarter Ended Quarter Ended Quarter Ended
June 30, June 30, June 30, June 30,
Income: 2001 2000 2001 2000 2001 2000 2001 2000
--------- --------- --------- --------- --------- --------- --------- ---------
Property sales $ 303 $ 320 $ 10,740 $ 19,524 $ 0 $ 0 $ 11,043 $ 19,844
Less: Cost of property sales 139 102 6,466 14,282 0 0 6,605 14,384
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit on property sales 164 218 4,274 5,242 0 0 4,438 5,460
--------- --------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Selling expenses 154 384 766 430 0 0 920 814
General and administrative 0 0 0 9 448 787 448 796
Real estate taxes 75 0 18 23 0 0 93 23
Environmental expenses 22 56 0 0 0 0 22 56
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses 251 440 784 462 448 787 1,483 1,689
--------- --------- --------- --------- --------- --------- --------- ---------
Net operating income (loss) (87) (222) 3,490 4,780 (448) (787) 2,955 (3,771)
Other Income and (Expense):
Portfolio income 0 0 0 0 262 78 262 78
Rental income 104 210 0 0 0 0 104 210
Other Income 0 0 43 224 0 0 43 224
Depreciation 0 0 (9) (23) (17) (25) (26) (48)
Management fee 0 0 0 0 (106) 0 (106) 0
--------- --------- --------- --------- --------- --------- --------- ---------
Total other income 104 210 34 201 139 53 277 464
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 17 $ (12) $ 3,524 $ 4,981 $ (309) $ (734) $ 3,232 $ 4,235
========= ========= ========= ========= ========= ========= ========= =========
Properties, net of
accumulated depreciation $ 732 $ 760 $ 30,629 $ 49,410 $ 434 $ 177 $ 31,795 $ 50,347
========= ========= ========= ========= ========= ========= ========= =========
Total assets $ 1,755 $ 917 $ 33,753 $ 53,453 $ 8,513 $ 3,866 $ 44,021 $ 58,236
========= ========= ========= ========= ========= ========= ========= =========
11
HEARTLAND PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Unaudited)
(1) The Land Sales business segment consists of approximately 14,052 acres
of land located throughout 12 states for sale as of June 30, 2001, and
the related rentals, sales and marketing and operating expenses.
(2) The Property Development business segment consists of the approximately
536 acres representing 13 sites that Heartland is in the process of
developing or homebuilding communities in which Heartland is currently
acquiring finished lots, selling and building homes. The related
selling and operating expenses are also reported for this business
segment.
(3) The Corporate level consists of portfolio income from investments,
salaries and general and administrative expenses for the employees and
occupied commercial space at Kinzie Station Phase I located in
Chicago, Illinois.
6. Employee Compensation Arrangements
The President and Chief Executive Officer of the Company will receive
commencing January 1, 2000 and continuing thereafter during the time he is
employed incentive payments equal to 1/2% of the net proceeds from sales of
certain real estate after deducting any debt obligations, closing costs and
any real estate brokers commission. As of December 31, 2000 and for the six
months ended June 30, 2001, $73,000 and $66,000, respectively, had been
accrued as compensation expense under this plan. As of June 30, 2001,
$113,000 had been paid to the President and Chief Executive Officer by the
Company. On October 18, 2000, the President and Chief Executive Officer of
Heartland borrowed $375,000 from the Company, of which $330,000 remains
outstanding at June 30, 2001 and is included as part of accounts receivable
at June 30, 2001. The note is due October 17, 2005, and interest is payable
quarterly at the rate of 11% per year. On October 17, 2000, an amendment to
the employment agreement authorizes the Company to deduct from any incentive
payment made to him 40% of that payment and apply it to his outstanding note
due to the Company. As a result of this amendment, $45,000 of the above
described payment of $113,000 was applied to the outstanding note balance.
Effective January 1, 2000, the Company approved the CMC Heartland Partners
Incentive Plan ("CMC Plan") and the Sales Incentive Plan ("Sales Plan") to
provide incentives to attract, retain or motivate highly competent employees
of the Company. The aggregate benefits payable under the CMC Plan shall be
computed by multiplying the following percentages (3% for the years 2000 and
2001, 2% for the year 2002 and 1% for the year 2003) by the net proceeds from
the sale of certain land parcels during those years. The aggregate benefits
payable under the Sales Plan shall be computed by multiplying 3% for the
years 2000 and 2001 by the net proceeds from the sale of certain real estate
during those years. As of December 31, 2000 and for the six months ended
June 30, 2001, $533,000 and $305,000, respectively, had been accrued as
compensation expense under the plans. As of June 30, 2001, $220,000 had been
paid to the Officers by the Company.
7. Subsequent Event
On August 10, 2001, the Kinzie Station Phase II 1.2 acre commercial property
sold to a developer for use as a parking facility closed at a sales price of
$2,937,000. At that time the LNB line of credit was reduced by $2,600,000. The
outstanding amount owed LNB is $4,000,000 at August 10, 2001.
12
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
We caution you that certain statements in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section, and
elsewhere in this Form 10-Q are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and other important factors, including the risks
described in the Management's Discussion and Analysis of Financial Condition
and Results of Operations section, and elsewhere in this Form 10-Q. The
Company's actual future results, performance or achievement of results and
the value of the partnership Units, may differ materially from any such
results, performance or achievement or value implied by these statements. We
caution you not to put undue reliance on any forward-looking statement in
these documents. The Company claims the protections of the safe harbor for
forward-looking statements contained in Section 21E of the Securities
Exchange Act of 1934.
Liquidity and Capital Resources
Cash flow from operating activities has been derived primarily from proceeds
of property sales. Cash was $3,564,000 (including $1,902,000 of restricted
cash) at June 30, 2001, and $2,849,000 (including $2,699,000 of restricted
cash) at December 31, 2000.
Net cash provided by operating activities was $4,693,000 in the first six
months of 2001, compared to ($769,000) used in operating activities in the
first six months of 2000. The increase in net cash provided by operating
activities of $5,462,000 is mainly attributable to the significant decrease
of housing inventories in the first six months of 2001 as a result of the
closing of sold units in Kinzie Station Phase I.
Development Property
At June 30, 2001, property designated for development consisted of 13 sites
comprising approximately 536 acres. The book value of this land is $9,474,000
or an average of $17,700 per acre. Heartland reviews these properties to
determine whether to hold, develop, joint venture or sell. Heartland's
objective for these properties is to maximize unitholder value.
Kinzie Station
Heartland has a 3.88 acre site in the City of Chicago known as Kinzie
Station. Zoning approval for the construction of 381 residential units on
this 3.88 acre site was received in 1997. On March 28, 2001, zoning approval
to increase the total number of residential units from 381 to 442 units was
received from the City of Chicago. In addition to the 3.88 acre site, the
Company owns approximately 9 acres of land and 4 acres of air rights adjacent
to Kinzie Station. This acreage is currently zoned for industrial and
manufacturing uses. The Company has entered into a contract, subject to
various contingencies, to sell a 1.66 acre parcel of this land to a developer
for approximately $2,000,000.
13
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Kinzie Station Phase I
Kinzie Station Phase I is situated on 1.23 acres. The construction of Kinzie
Station Phase I started on October 1, 1998. The Company has closed 151 Tower
units and 17 Plaza units during the period May 1, 2000 to June 30, 2001.
Kinzie Station
Phase I
Unit Detail
As of June 30, 2001
Total Number Sale Contracts
of Units To-Date
------------ --------------
Tower Building 163 153
Plaza 24 17
Townhomes 5 3
------------ --------------
Total 192 173
============ ==============
On October 20, 1999, the Company executed loan documents with Bank One of
Illinois ("Bank One") for a loan of $5,250,000 to construct the Kinzie Station
Plaza building. On January 30, 2001, the final principal and interest payment
was made on the $5,250,000 Kinzie Station Plaza building loan. On February 23,
2001, the Company amended this loan agreement with Bank One, and borrowed an
additional $3,000,000, of which $2,500,000 remains outstanding at June 30, 2001,
and changed the maturity date of the loan to February 23, 2002. The loan bears
interest at the prime rate (6.75% at June 30, 2001).
Kinzie Station Phase II
Heartland has a 2.65 acre site in the City of Chicago known as Kinzie Station
Phase II. On approximately 1.45 acres, the Company expects to construct 250
residential units with the remaining 1.2 acres available for future commercial
development. The Company had entered into a contract to sell the 1.2 acre
commercial property to a developer for use as a parking facility for $2,937,000.
This sale closed August 10, 2001. As described above in the Kinzie Station
section, zoning approval was received March 28, 2001.
14
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Kinzie Station
Phase II
Unit Detail
As of June 30, 2001
Total Number
of Units
Tower Building 242
Townhomes 8
------------
Total 250
============
As of June 30, 2001, the Company has pre-sold 26 Tower units for a total
sales volume of approximately $8,400,000.
Osprey Cove
Included in the aforementioned 536 acres are approximately 2 acres consisting
of 7 lots purchased for $279,000 or an average of $39,900 per lot at Osprey
Cove in St. Marys, GA. Osprey Cove is a master-planned residential community
with a wide range of natural and recreation amenities, which includes a
recreational complex, lakes, a boat dock and a boat launch. In December,
1999, the Company decided to cease operations at Osprey Cove. As of June 30,
2001, 62 contracts have closed in Osprey; 11 in 2001, 16 in 2000, 20 in 1999,
13 in 1998 and 2 in 1997.
It is anticipated that the 2 completed inventory homes will be sold and
closed in the ordinary course of business. Of the 5 lots owned by Heartland,
2 lots are sold and the remaining 3 lots are being marketed and will be sold
and closed in the ordinary course of business.
Osprey Cove
Unit Inventory Detail
As of June 30, 2001
Inventory homes 2
Lots owned-sold 2
Lots owned-inventory 3
------------
Total unit inventory 7
============
At Osprey Cove in St. Marys, Georgia, the First National Bank of St. Marys
("FNB") in Georgia has made two loans on two inventory homes of $170,000 and
$235,000 to the Company. The loans mature on October 12, 2001 and January 5,
2002, respectively. The loans bear interest at the London Interbank Offering
Rate plus 3.35% and 3.85%, respectively (7.1% and 7.6% at June 30, 2001). At
June 30, 2001, $405,000 had been advanced to Heartland on the two loans.
15
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Longleaf
At June 30, 2001, the Company owns 207 lots in its Longleaf community located
in Southern Pines, North Carolina. These 207 lots were purchased for
$2,403,000, an average of $11,600 per lot.
In Longleaf, the Company has closed , as of June 30, 2001, 34 contracts; 6 in
2001, 15 in 2000 and 13 in 1999. When the Company assumed day to day
operations of Longleaf in April, 1998, there were a number of homes under
construction which were owned by the developer, as well as resale homes, on
the market. As of June 30, 2001, the Company has sold 36 homes and 5 lots
for these owners since April 1, 1998.
Longleaf
Unit Inventory Detail
As of June 30, 2001
Model homes 2
Sold homes under construction 1
Inventory homes under construction 6
Lots owned 198
------------
Total unit inventory 207
============
As of December 8, 2000, Heartland has an agreement for a $3,000,000 revolving
line of credit for the construction of homes in Longleaf with Bank One.
Also, on December 8, 2000, Heartland borrowed $250,000 to purchase the
remaining lots owned by the developer of Longleaf. The revolving line of
credit and $250,000 loan mature April 12, 2002 and bear interest at the prime
rate (6.75% at June 30, 2001). At June 30, 2001, $1,199,000 had been
advanced by Bank One to Heartland on these two loans.
Bloomfield
Heartland owned 122 acres of undeveloped acreage in Rosemount, Minnesota. On
June 21, 2001, Centex Homes purchased the 122 acres from the Company for
$5,175,000.
Bozeman, Montana
Heartland has entered into an option to sell its 14-acre property in Bozeman,
Montana to the Bozeman Public Library for $2.25 million.
16
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Other Development Activities
Heartland, along with Colliers, Bennett and Kahnweiler, a Chicago based real
estate company, and Wooton Construction, have formed a joint venture to
develop approximately 265,000 square feet of industrial space in the Goose
Island Industrial Park in Chicago, Illinois. As of June 30, 2001, the
buildings had been built and leases had been signed for all of the 265,000
square feet.
On December 1, 1998, the Fife property was annexed to the City of Fife,
Washington. A Local Improvement District has been approved in order to
support the improvement and extension of sewers and sewer capacity for the
site. The city of Fife has zoned the property for residential usage.
Heartland has prepared and submitted the Environmental Impact Statement and
the preliminary site plan for the site to the City for acceptance and
approval. On July 23, 2001, the Fife Planning Commission voted unanimously to
recommend and approve the preliminary site plan. The Fife City Council is
scheduled to meet in September, 2001 on this matter.
The real estate development business is highly competitive. Heartland is
subject to competition from a great number of real estate developers,
including developers with national operations, many of which have greater
sales and financial resources than Heartland.
Property Sales and Leasing Activities
The Company has the right to sell easements for fiber optic lines along or
across 83 miles of rail right of way running from downtown Chicago west to
Elgin and Northwest to Fox Lake, Illinois. The Company actively markets
fiber optics easements and is seeking opportunities to generate additional
proceeds through the sale of these rights. The Company receives 2/3 of the
proceeds of any sale.
Heartland's current inventory of land held for sale consists of 14,052 acres
located throughout 12 states. The book value of this inventory is
approximately $732,000. The majority of the land is former railroad
rights-of-way, long, narrow strips of land approximately 100 feet in width.
Some of Heartland's sites located in small rural communities or outlying
mid-cities are leased to third parties for agricultural, industrial, retail
and residential use. These properties may be improved with the lessee's
structures and include grain elevators, storage sheds, parking lots and small
retail service facilities.
The sale, management and leasing of the Company's non-development real estate
inventory is conducted by Heartland's Sales and Property Management
Department. The volume of the Company's sales has slowed over the last five
years due to the less desirable characteristics of the remaining properties.
The Company has a current active lease portfolio of approximately 150
leases. Less than 1% of its total acreage is leased. The number of leases
declines each year as sales of properties are made to existing lessees. The
majority of the leases provide nominal rental income to Heartland. The
leases generally require the lessee to construct, maintain and remove any
improvements, pay property taxes, maintain insurance and maintain the
condition of the property. The majority of the leases are cancellable by
either party upon thirty to sixty days notice. Heartland's ability to
terminate or modify certain of its leases is restricted by applicable law and
regulations.
17
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
For properties held for sale, an impairment loss is recognized when the fair
value of the property, less the estimated cost to sell, is less than the
carrying amount of the property.
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 $4 million at June 30, 2001 for possible environmental liabilities,
including remediation, legal and consulting fees. 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.
In addition, Heartland has established an allowance for resolution of
non-environmental claims of $.3 million.
Heartland does not at this time anticipate that these claims or assessments 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 Company will continue to be able to assert the bankruptcy bar arising
from the reorganization of its predecessor and that 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 affected 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 believes it will have sufficient funds available for
operating expenses, but anticipates the necessity of utilizing outside financing
to fund development projects. As of June 30, 2001, the Company had a line of
credit with LaSalle National Bank ("LNB") in the amount of $9.6 million. Cash in
the amount of $1,150,000 is pledged as an interest reserve. The line of credit
matures December 31, 2001. Advances against the line of credit bear interest at
the prime rate of LNB plus 1.5% (8.25% at June 30, 2001). At June 30, 2001,
$6,600,000 had been advanced to the Company by LNB against the line of credit.
On August 10, 2001, the Kinzie Station Phase II 1.2 acre commercial property
sold to a developer for use as a parking facility closed at a sales price of
$2,937,000. At that time the LNB line of credit was reduced by $2,600,000. The
outstanding amount owed LNB is $4,000,000 at August 10, 2001. If the $1,150,000
interest reserve was applied to the outstanding note balance on August 10, 2001
of $4,000,000, Heartland would owe LNB $2,850,000.
18
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Results of Operations
Operations for the second quarter and six months ended June 30, 2001,
resulted in net income of $3,232,000 and $5,426,000, respectively. For the
second quarter and six months ended June 30, 2001, the income allocated to
the Class A Limited Partners is $3,184,000 and $5,345,000, respectively, and
$1.49 and $2.50 per Class A Unit, respectively. Operations for the second
quarter and six months ended June 30, 2000, resulted in net income of
$4,235,000 and $3,316,000, respectively. The income was allocated 100% to
the Class B Limited Partner.
For the second quarter and six months ended June 30, 2000, no income was
allocated to the Class A Unitholders because the partnership agreement
provides that if an allocation of a net loss to a partner would cause that
partner to have a negative balance in its capital account at a time when one
or more partners would have a positive balance in their capital account such
net loss shall be allocated only among partners having positive balances in
their capital account. In the prior periods losses were allocated only to the
Class B Limited Partner. However, the Class A Limited Partners Capital
accounts have been restored to a positive balance and income for the second
quarter and the first six months of 2001 were allocated to the Class A
Limited Partners according to their proper percentage.
The increase in net income for the first six months of 2001 compared to the
net income in the first six months of 2000 of $2,110,000 is due to the
closing of 28 Tower and Plaza units at Kinzie Station Phase I producing gross
revenues of $9,065,000 and the closing of two parcels of land comprising a
total of 235 acres in Bloomfield located in Rosemount, Minnesota for an
aggregate sales price of $9,175,000.
Total operating expenses were $3,028,000 and $2,909,000 for the first six
months ending June 30, 2001, and 2000, respectively. The increase of $119,000
is due to increased selling expenses of $498,000 primarily related to the
closing of the Kinzie Station Phase I units offset by a reduction in general
and administrative expenses of $359,000.
Economic and Other Conditions Generally
The real estate industry is highly cyclical and is affected by changes in
local, national, and global economic conditions and events, such as
employment levels, availability of financing, interest rates, consumer
confidence and the demand for housing and other types of construction. Real
estate developers are subject to various risks, many of which are outside the
control of the developer, including real estate market conditions, changing
demographic conditions, adverse weather conditions and natural disasters,
such as hurricanes, tornados, delays in construction schedules, cost
overruns, changes in government regulations or requirements, increases in
real estate taxes and other local government fees and availability and cost
of land, materials and labor. The occurrence of any of the foregoing could
have a material adverse effect on the financial conditions of Heartland.
19
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Access to Financing
The real estate business is capital intensive and requires expenditures for
land and infrastructure development, housing construction and working
capital. Accordingly, Heartland anticipates incurring additional indebtedness
to fund their real estate development activities. As of June 30, 2001,
Heartland's total consolidated indebtedness was $10,704,000. There can be no
assurance that the amounts available from internally generated funds, cash on
hand, Heartland's existing credit facilities and sale of non-strategic assets
will be sufficient to fund Heartland's anticipated operations. Heartland may
be required to seek additional capital in the form of equity or debt
financing from a variety of potential sources, including additional bank
financing and sales of debt or equity securities. No assurance can be given
that such financing will be available or, if available, will be on terms
favorable to Heartland. If Heartland is not successful in obtaining
sufficient capital to fund the implementation of its business strategy and
other expenditures, development projects may be delayed or abandoned. Any
such delay or abandonment could result in a reduction in sales and would
adversely affect Heartland's future results of operations.
Period-to-Period Fluctuations
Heartland's real estate projects are long-term in nature. Sales activity
varies from period to period, and the ultimate success of any development
cannot always be determined from results in any particular period or periods.
Thus, the timing and amount of revenues arising from capital expenditures are
subject to considerable uncertainty. The inability of Heartland to manage
effectively their cash flows from operations would have an adverse effect on
their ability to service debt, and to meet working capital requirements.
Interest Rate Sensitivity
The Company's total consolidated indebtedness at June 30, 2001 is
$10,704,000. The Company pays interest on its outstanding borrowings under
revolving credit facilities and fixed loan amounts at the prime rate plus
0.00% to 1.5%. An adverse change of 1.00% in the prime rate would increase
the quarterly interest incurred by approximately $27,000.
The Company does not have any other financial instruments for which there is
a significant exposure to interest rate changes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Management's Discussion and Analysis of Financial Condition and Results
of Operations: Economic and Other Conditions Generally, Access to Financing
and Interest Rate Sensitivity.
20
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
At June 30, 2001, Heartland's allowance for claims and liabilities was
approximately $4.3 million. During the six months ended June 30, 2001, a
decrease of approximately $28,000 in the provision was recorded in respect to
environmental matters. Material legal matters are discussed below.
Soo Line Matters
The Soo Line Railroad Company (the "Soo") has asserted that the Company is
liable for certain occupational injury claims filed after the consummation of
an Asset Purchase Agreement and related agreements ("APA") by former
employees now employed by the Soo. The Company has denied liability for each
of these claims based on a prior settlement with the Soo. The Soo has also
asserted that the Company is liable for the remediation of releases of
petroleum or other regulated materials at six different sites acquired from
the Company located in Iowa, Minnesota and Wisconsin. The Company has denied
liability based on the APA.
The occupational and environmental claims are all currently being handled by
the Soo, and the Company understands the Soo has paid settlements on 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 June, 1997, the Port of Tacoma ("Port") filed a complaint in the United
States District Court for the Western District of Washington alleging that
the Company was liable under Washington state law for the cost of the Port's
remediation of a railyard sold in 1980 by the bankruptcy trustee for the
Company's predecessor to the Port's predecessor in interest.
On October, 1, 1998, the Company entered into a Settlement Agreement with the
Port, subsequently modified July 15, 1999 and February 20, 2001, in which the
Port released all claims and the Company agreed either to (a) pay $1.1
million on or before December 31, 2001, plus interest from January 1, 1999,
or (b) to convey to the Port real property to be agreed upon at a later
date. At June 30, 2001, Heartland's allowance for claims and liabilities for
this site was $1,100,000.
The Company will not make a claim on its insurance carriers in this matter
because the settlement amount does not exceed the self insured retention
under the applicable insurance policies.
21
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Wheeler Pit, Janesville, Wisconsin
In November, 1995, the Company settled a claim with respect to the Wheeler
Pit site near Janesville, Wisconsin. The Company's only outstanding
obligation under the settlement is to pay 32% of the monitoring costs for
twenty-five years beginning in 1997.
Milwaukee, Wisconsin
On December 2, 2000, the Redevelopment Authority of the City of Milwaukee
("RACM") filed suit in Milwaukee County Circuit Court to obtain access to
appraise, survey and conduct environmental and geo-technical investigations
on certain property owned by the Company adjacent to the Milwaukee Brewers
baseball stadium in furtherance of RACM's efforts to acquire the property by
condemnation. Heartland has vigorously opposed certain elements of RACM's
request for access and right to proceed. Management is not able to express
an opinion at this time as to the merits of this action.
As part of the Company's sale of certain property in Milwaukee, Wisconsin to
the State of Wisconsin, in December, 2000, for $1,400,000, the Company
undertook to cause a lessee of part of the property to surrender its lease.
By Settlement Agreement dated July 5, 2001, the lessee agreed to surrender
its lease in consideration, among other things, of the payment from the
Company of $126,000. This amount was paid to the lessee in July, 2001.
Miscellaneous Environmental Matters
Under environmental laws, liability for hazardous substance contamination is
imposed on the current owners and operators of the contaminated site, as well
as the owner or the operator of the site at the time the hazardous substance
was disposed or otherwise released. In most cases, this liability is imposed
without regard to fault. Currently, the Company has known environmental
liabilities associated with certain of its properties arising out of the
activities of its predecessor or certain of its predecessor'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 its predecessor's lessees. The
following is a summary of material known environmental matters, in addition
to those described above.
The Montana Department of Environmental Quality ("DEQ") has asserted that the
Company is liable for some or all of the investigation and remediation of
certain properties in Montana sold by its predecessor's reorganization
trustee prior to the consummation of its predecessor's reorganization. The
Company has denied liability at certain of these sites based on the
reorganization bar of the Company's predecessors. The Company's potential
liability for the investigation and remediation of these sites was discussed
in detail at a meeting with DEQ in April, 1997. While DEQ has not formally
changed its position, DEQ has not elected to file suit. Management is not
able to express an opinion at this time whether the cost of the defense of
this liability or the environmental exposure in the event of the Company's
liability will or will not be material.
22
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
At twelve 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 or long term
monitoring programs at Farmington, Minnesota, and Miles City, Montana.
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. A
portion of the Company's property is located over a well field which was
placed on the national priority list in October, 1992. Sampling by the Army
Corps of Engineers 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. The Company has not been named as a
potentially responsible party.
In 1995, at a 5.95 acre parcel in Minneapolis, Minnesota, environmental
sampling disclosed that the parcel was impacted by releases of regulated
materials from the 1960s operations of a former lessee. The Company
continues to investigate the environmental condition of the property on a
voluntary basis under the direction of the Minnesota Department of
Agriculture.
Sampling performed in November, 2000, has indicated the presence of solvents
in the groundwater under certain property owned by the Company in Milwaukee,
Wisconsin. Management will not be able to determine the materiality of the
remediation costs, if any, of these materials until the concentrations and
location of the release has been quantified.
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 its 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.
23
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
----------- -------------------------------------------------------------
10.49 First Agreement dated June 28, 1999 effective July 15, 1999 between
the Port of Tacoma and CMC Heartland Partners modifying terms of
settlement agreement and affecting real property in Pierce County,
Washington (filed herewith).
10.50 Sixth Amendment to Amended and Restated Loan and Security Agreement
dated March 31, 2001 between CMC Heartland Partners, Heartland
Partners, LP and CMC Heartland Partners IV, LLC and LaSalle Bank
National Association (filed herewith).
10.51 Second Amendment of Construction Loan Agreement, Note, Deed of Trust
and Other Loan Documents dated April 12, 2001 between CMC Heartland
Partners VII, LLC and Bank One, Illinois, N.A. (filed herewith).
10.52 $1,000,000 Line of Credit Promissory Note dated May 11, 2001 between
Heartland Technology, Inc. (borrower) and Heartland Partners, L.P.
and CMC Heartland Partners (collectively, the payee) (filed herewith).
10.53 $1,500,000 Line of Credit Promissory Note dated July 3, 2001 between
Heartland Technology, Inc. (borrower) and Heartland Partners, L.P.
and CMC Heartland Partners (collectively, the payee) (filed herewith).
(b) Reports on Form 8-K;
No report on Form 8-K was filed during the quarter ended June 30, 2001.
24
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
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: August 14, 2001 BY: /s/ Edwin Jacobson
----------------------------------------
Edwin Jacobson
President and Chief Executive Officer
Heartland Technology, Inc.
The General Partner
(Principal Executive Officer)
Date: August 14, 2001 BY: /s/ Richard P. Brandstatter
----------------------------------------
Richard P. Brandstatter
Vice President-Finance, Secretary
And Treasurer of
Heartland Technology, Inc.
The General Partner
(Principal Financial and Accounting Officer)
25
HEARTLAND PARTNERS, L.P.
JUNE 30, 2001
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- ----------------------------------------------------------------
10.49 First Agreement dated June 28, 1999 effective July 15, 1999 between
the Port of Tacoma and CMC Heartland Partners modifying terms of
settlement agreement and affecting real property in Pierce County,
Washington (filed herewith).
10.50 Sixth Amendment to Amended and Restated Loan and Security Agreement
dated March 31, 2001 between CMC Heartland Partners, Heartland
Partners, LP and CMC Heartland Partners IV, LLC and LaSalle Bank
National Association (filed herewith).
10.51 Second Amendment of Construction Loan Agreement, Note, Deed of Trust
and Other Loan Documents dated April 12, 2001 between CMC Heartland
Partners VII, LLC and Bank One, Illinois, N.A. (filed herewith).
10.52 $1,000,000 Line of Credit Promissory Note dated May 11, 2001 between
Heartland Technology, Inc. (borrower) and Heartland Partners, L.P.
and CMC Heartland Partners (collectively, the payee)(filed herewith).
10.53 $1,500,000 Line of Credit Promissory Note dated July 3, 2001 between
Heartland Technology, Inc. (borrower) and Heartland Partners, L.P.
and CMC Heartland Partners (collectively, the payee)(filed herewith).
26