ITEM 1. BUSINESS
Company Profile
Interstate General Company L.P. (the "Company" or "IGC") was formed as a Delaware limited partnership in 1986. Directly and through predecessors, the Company has been engaged in business since 1957. IGC's headquarters are located in Chantilly, Virginia. IGC has traded publicly as a master limited partnership since February 1987 on the American Stock Exchange ("AMEX") and Pacific Stock Exchange ("PSE"). During 1998, the Company's management and the Board of Directors of the Company's Managing General Partner restructured IGC and transferred the primary real estate operations to a real estate investment trust, American Community Properties Trust ("ACPT") and distributed, as a dividend, the common shares of ACPT to its unitholders (the "Distribution").
The purpose of the Distribution was to create an attractive investment vehicle for the principal real estate assets and operations of IGC that will not be burdened with the operating losses of American Family Homes, LLC ("AFH") and the capital needs of Interstate Waste Technology Inc. ("IWT") and Caribe Waste Technology Inc. ("CWT") or with the wetlands litigation. In addition, ACPT, as a type of business trust whose principal income is dividends, should be a more attractive investment for pension funds and mutual funds than is IGC as a master limited partnership.
IGC continues to own certain assets including the Towne Center land in St. Charles, Maryland, which has been the subject of the wetlands litigation, certain single family home lots in the Dorchester neighborhood in St. Charles, certain land in Pomfret, Maryland and St. Mary's County, Maryland, a 50% interest in a partnership that owns land in Brandywine, Maryland, all of the shares of AFH, rights to collect the principal balance of a note in the amount of $7.5 million payable by a subsidiary of ACPT, as well as fractional interests in Chastleton Apartment Associates Limited Partnership and Coachman's Limited Partnership. IGC conditionally has agreed to transfer to American Land 14 acres of commercial land in St. Charles, having an appraised gross retail value as of December 31, 1996 of $4,214,000 and a book value of $995,000 at December 31, 1998, if and when IGC settles the wetlands litigation on terms approved by the Board of Directors of Interstate General Management Corporation ("IGMC"), provided that transfer of the land will not cause the IGC Units to be delisted from AMEX or the PSE. If IGC is unable to settle the wetlands litigation on satisfactory terms or IGC does not receive confirmation of the continued listing of IGC units, IGC will retain this commercial land.
All of the common stock of IWT and CWT (excluding shares issued as incentive compensation for employees) are held in a trust (the "CWT Trust") for the benefit of IGC Unitholders.
The following summarizes the business operations and segments of IGC:
A. Community/Land Development
IGC has extensive experience in developing planned communities. Historically, the Company and its predecessors have developed land for more than 13,000 housing units.
The Company currently holds 109 acres in Towne Center South, St. Charles, Maryland. The property is zoned for commercial, retail, and office development. The Company plans to begin development of 80 acres if and when the wetlands litigation is settled.
Also in Charles County, the Company plans to develop an 812 acre property, known as Pomfret, as an age-qualified adult community consisting of 2,000 single family housing units and a golf course.
In addition, the Company has developed the 170 acre planned community of Westbury, located in Lexinton Park, Maryland. The community is located in St. Mary's County, approximately one mile from the Patuxent River Naval Air Warfare Center. Westbury's final phase, consisting of approximately 250 single-family home lots, is currently under construction. In March 1997, the Company entered into a contract to sell the remaining 52 townhome lots to a third-party home builder of which 30 remain to be purchased at December 31, 1998.
In Prince George's County, Maryland, the Company is proceeding with the development of Phase One of the 277 acre mixed-use project known as Brandywine. IGC obtained building permits for the first 30 single family homes in December 1998. Construction is expected to begin in mid 1999.
Environmental Impact. Management believes that all current land development plans can be completed without a material adverse environmental impact and in compliance with government regulations.
Competition. The Company is subject to market competition on its commercial land sales. However, the Company believes it can compete successfully by offering well located land that can be developed at a reasonable cost.
D. Homebuilding
American Family Homes, LLC ("AFH", formerly American Family Homes, Inc.) is a wholly owned subsidiary of IGC that builds semi-custom homes for homebuyers who own land or have land under contract. AFH operates based out of seven offices in Virginia, North Carolina and South Carolina.
Environmental Impact. Management believes that the Company's homebuilding operations are in compliance with governmental regulations.
Competition. The housing industry is cyclical and is influenced by various economic factors and seasonality. These variables include, for example, consumer confidence, interest rate fluctuations, property and federal taxes, demographics and mortgage finance options. The Company's homebuilding operations could be affected by any one or more of these factors.
For AFH, the homebuilding industry is highly competitive in the mid- Atlantic region. In addition to a wide variety of builders, there is an abundant supply of resale homes and rental housing. There are three major competitors in the Carolinas, and two major competitors in Virginia. AFH
creates its own niche in the market by offering the convenience and flexibility to build a home in the location of the customer's choice.
C. Investment in Waste Technologies
In 1990, IGC formed a wholly owned subsidiary, Interstate Waste Technologies, Inc. ("IWT"), to develop innovative solutions for the disposal of municipal waste and to pursue waste disposal contracts with municipalities.
In 1996, a second subsidiary, Caribe Waste Technologies, Inc. ("CWT"), was formed in Puerto Rico. CWT is an entity established to perform waste disposal projects in the Caribbean.
In December 1998, CWT entered into a host community and sponsor agreement with the Municipality of Caguas, Puerto Rico. The agreement describes the basis on which CWT will contract, develop and construct a 3,300 ton per day solid waste facility using proprietary gasification technology from Thermoselect S.A., an unrelated third party. To provide waste for the facility, CWT management is pursuing long-term solid waste disposal service agreements with municipalities in Puerto Rico. Other organizations competing to build facilities for disposal of Puerto Rico's solid waste include Montenay, a subsidiary of Compagnie Generale des Eaux, Kvaerner, and SEMASS.
In 1996, CWT proposed to build a solid waste facility for the Island Government of Saint Maarten, Netherlands Antilles. After an evaluation of proposals from four companies by the Government and its Dutch technical consultants, the Island Government entered into a Letter of Intent with CWT in October 1997. The Letter of Intent calls for CWT to submit a final proposal to the Island Government, followed by a period of exclusive negotiation for a solid waste disposal service agreement. CWT submitted its proposal for a 330 ton per day Thermoselect solid waste gasification facility to the Island Government in March 1998, and a revised proposal in August, 1998. Recently, a representative of the Island government has asked for a further revision to the proposal. CWT management is preparing a reply.
In November 1997, the Government of the U.S. Virgin Islands ("GVI") issued a Request for Qualification ("RFQ") for Integrated Comprehensive Solid Waste Management Services. CWT responded in December 1997. Following an evaluation of the submittals, the GVI notified CWT in February 1998 that CWT had qualified to receive an RFP. CWT management responded to the RFP on August 3, 1998. Thereafter, the procurement was canceled at approximately the time a new governor was elected. CWT is seeking to learn whether there will be a new procurement or negotiations will resume with the existing bidders.
Environmental Impact. Management believes that the proposed IWT and CWT facilities can be completed without a material adverse environmental impact and in compliance with government regulations. The approvals and permits required under the U.S. Clean Air Act, U.S. Clean Water Act, and corresponding foreign regulations are many and will require substantial time and effort.
Competition. There is intense competition for municipal waste disposal contracts throughout the United States, as well as internationally. The competition uses a variety of methods and there are a range of costs available. Management feels IWT and CWT can provide a
competitive price for its superior facilities.
General
Employees. IGC has 40 full-time employees as of December 31, 1998. All employees are based in the United States.
Significant Customers. No single customer accounted for more than 10% of IGC's revenues during the year ended December 31, 1998.
ITEM 2.
ITEM 2. PROPERTIES
IGC owns real property located in Charles County, Maryland; Prince George's County, Maryland; St. Mary's County, Maryland; Prince William County, Virginia; North Carolina; South Carolina and Virginia.
As of December 31, 1998, the Company's community development land holdings consisted of the following:
Charles County, Maryland Finished inventory- Residential lots 16 Commercial, office or light industrial acres 109 Pre-development acres 812
St. Mary's County, Maryland Finished inventory- Residential lots 30 Pre-development Residential lots 246
Prince George's County, Maryland Pre-development acres 277
Prince William County, Virginia Finished inventory- Residential lots 87
As of December 31, 1998, the Company's homebuilding inventory consisted of the following:
Virginia Homes under construction 16
North Carolina Homes under construction 16
South Carolina Homes under construction 14
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As reported in Registrant's 10-K for the period ending December 31,
1997, convictions in the Wetlands litigation in the United States District Court for the District of Maryland were reversed by the United States Court of Appeals for the Fourth Circuit and the case remanded to the District Court for a new trial.
Counsel for Registrant is currently engaged in negotiations with the U.S. Attorney's office on a possible disposition of the Wetlands litigation that would require payment of a fine by Registrant, a portion of which will be abated by a contribution of approximately 2 acres of land in Towne Center South zoned for commercial development, remediation of two parcels, totaling approximately 73 acres, in St. Charles and Registrant's undertaking an environmental compliance program. Registrant would also plead guilty to a single felony count. All other criminal charges in the indictment against Registrant and its president, James J. Wilson, would be dropped. The foregoing settlement proposal has not been agreed upon by either Registrant or the U.S. Government, and there are a number of issues that are still under discussion. If agreement is reached, the disposition must be approved by the court. Management believes that the cost of such a settlement, not including cost of remediation, would not be materially greater than the amount ($1.1 million) currently reserved by IGC for the Wetlands litigation. If such a settlement is reached, a portion of the land in St. Charles presently encumbered by the Wetlands litigation would become available for development.
St. Charles has been zoned as a planned unit development that allows construction of approximately 24,730 housing units and 1,390 acres of commercial and industrial development. Charles County has agreed to provide sufficient sewer and water connections for all housing units remaining to be developed in St. Charles. IGC and St. Charles Associates Limited Partnership ("SCA") are involved in litigation with the County regarding (1) the level of sewer and water fees that may be imposed and (2) the level of school construction impact fees that may be imposed. In addition, IGC and SCA are asserting claims against the County for repayment of excessive sewer and water fees and school construction impact fees paid by them in the past.
The sewer and water litigation is entitled St. Charles Associates Limited Partnership, et al. v. County Commissioners of Charles County, et al., No. 89-720, Circuit Court for Charles County, Maryland. That litigation was filed in June 1989 and is continuing. The litigation originally sought a court ruling that the County was not entitled to impose sewer and water fees at the then-existing level upon residential units in the St. Charles Communities. That aspect of the litigation was settled by a Settlement Agreement dated November 1989, which was confirmed in a Consent Decree entered in March 1990. Subsequent aspects of the litigation have resulted from disputes over the interpretation of the Settlement Agreement and Consent Decree. The principal issues that are presently being contested between the County, IGC and SCA are (1) whether a study procured by the County in 1996 justifies the level of sewer and water connection fees which it imposes upon the St. Charles Communities; (2) whether SCA and IGC are entitled to an injunction against future excessive sewer and water fees; and (3) to what degree SCA and IGC are entitled to recover what they regard as excessive sewer and water fees they have paid in the past. The Circuit Court has ruled in SCA and IGC's favor that the County's 1996 study did not comply with the applicable restrictions and that SCA and IGC are entitled to an injunction against future excessive sewer and water fees. The Court further ruled that SCA and IGC must pursue claims for excess sewer and water fees paid in the past in Maryland's Tax Court. The Court's rulings are on appeal to Maryland's Court of Special
Appeals. As a result of the Distribution, St. Charles Community LLC has been added as an additional party to that appeal. SCA and IGC have commenced an action in Maryland Tax Court, which is a State administrative agency, to recover what they regard as excessive sewer and water fees that have been paid in the past. That case is titled St. Charles Associates Limited Partnership, et al. v. Charles County, et al., No. 1205, and was filed in February 1997.
SCA's and IGC's claims for the refund of excessive school impact fees paid to the County in the past are being pursued in the Maryland Tax Court as well, in actions entitled St. Charles Associates Limited Partnership, et al. v. County Commissioners of Charles County, et al., Case Nos. 961 (filed March 1994), 1038 (filed October 1994), and 98-MI-0083 (filed February 6, 1998). In those cases SCA and IGC are seeking both repayment of past excessive school impact fees paid to the County and a ruling as to the nature of their rights to credits against school impact fees for school sites that they have donated to the County. On December 15, 1998, the Circuit Court for Charles County, on appeal from a ruling of the Tax Court, ruled that certain of SCA's and IGC's refund claims had not been filed on a timely basis. SCA and IGC have appealed that ruling to Maryland's Court of Special Appeals.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
IGC held a special meeting of its unitholders in August 1998 to vote on the restructuring of IGC and simultaneous spinoff of Amercian Community Properties Trust.
PART II
ITEM 5.
ITEM 5. MARKET PRICES AND DISTRIBUTIONS ON UNITS
The IGC Units are traded on the American and the Pacific Stock Exchanges. The following table sets forth, for the periods indicated, the high and low sales prices per IGC Unit as reported in the consolidated transaction reporting system, and cash distributions paid to unitholders during these periods. IGC Units commenced public trading on February 19, 1987.
Cash Distributions Price Range of IGC Units ------------------------ ------------------------ Total (in thousands) Per Unit High Low ------------- -------- ----------- ---------
1998 Quarter: Fourth (a) $ -- $ -- $4-5/8 $11/16 Third -- -- 5 4 Second 209 .02 5-1/8 4 First -- -- 5-1/2 4-1/16
1997 Quarter: Fourth $ -- $ -- $5-3/8 $3-1/4 Third -- -- 4 2-7/8 Second -- -- 3-13/16 2-15/16 First -- -- 3-7/8 2-7/8
(a) The unit price is based on the Company after the Distribution and a one-for-five reverse unit split ("Reverse Split").
On October 5, 1998, in conjunction with the Distribution of assets, the Company issued ACPT shares to its unit holders. On that date, each unit holder received one share of ACPT for every two units of IGC owned.
As of the close of business on March 24, 1999, there were 247 Unitholders of record. As of March 24, 1999, the closing price reported by the American Stock Exchange was $5.625 per unit.
IGC is required by its Third Amended and Restated Limited Partnership Agreement, as amended, to make cash distributions to limited partners of not less than 55% of taxable income calculated for public IGC Unitholders as of the date of IGC's initial public offering. During the years ended December 31, 1998 and 1997, IGC had taxable (loss) income of $(5,736,000) and $330,000, respectively, or $(2.79) and $.04, respectively, per unit.
ITEM 6.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth combined financial and operating data for IGC. The following selected income statement and balance sheet data have been extracted from the audited financial statements of IGC for each of the years in the five-year period ended December 31, 1998. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations.") This information should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and related footnotes.
SELECTED FINANCIAL AND OPERATING DATA Years Ended December 31, ----------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (In thousands, except per unit amounts) Income Statement Data
Revenues Land sales (a) $13,446 $13,357 $14,717 $14,824 $22,296 Home sales 7,379 7,805 9,715 10,826 20,265 Equity in earnings from gaming properties 549 -- 4 (78) 7,288 Equity in earnings from partnerships and development fees 1,149 1,494 16,530 2,647 4,941 Rental property revenues 6,693 8,737 7,577 4,642 4,538 Management and other fees 2,518 3,775 4,816 3,894 3,507 Interest and other income 1,214 1,044 1,015 945 687 ------- ------- ------- ------- ------- Total revenues 32,948 36,212 54,374 37,700 63,522
Wetlands litigation expenses 26 1,772 973 4,107 498 Other expenses 31,664 37,419 39,922 35,108 52,872 Income taxes 740 606 3,634 1,452 3,511 Net income (loss) 518 (3,585) 9,845 (1)(2,967) 6,641 Basic net income (loss) per unit .25 (1.74) 4.80 (1) (1.45) 3.25 Cash distributions per unit .10 -- .55 -- .50
(a) Includes sales to affiliates 1,179 3,367 9,086 3,233 --
Years Ended December 31, ----------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Balance Sheet Data (In thousands)
Assets related to community development $23,669 $82,509 $83,085 $79,558 $70,061 Assets related to rental properties 46 47,291 52,698 36,722 35,608 Assets related to home building 2,719 2,573 2,491 3,819 4,998 Total assets 40,264 145,038 148,568 132,093 123,513
Debt related to community development Recourse 2,633 35,176 34,077 47,841 36,661 Non-recourse -- 2,295 2,153 2,034 4,268 Debt related to rental properties Recourse -- 969 1,139 1,322 1,559 Non-recourse -- 39,101 39,508 22,650 22,771 Debt related to homebuilding Recourse 740 159 502 981 2,398 Total liabilities 12,873 101,750 101,974 94,184 82,808 Partners' capital 27,391 43,288 46,594 37,909 40,705
(1) Includes a $932,000 or $.45 per Unit reduction for the extraordinary item-early extinguishment of debt. See Note 3 of the Company's consolidated financial statements included in Item 8.
Years Ended December 31, ----------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Operating Data
Community Development Residential lots sold 417 250 523 134 228 Residential lots used by Company's homebuilding operations -- 5 27 25 44 Residential lots used in joint venture operations 102 21 -- -- -- Residential lots transferred to Company's rental property operations -- -- -- 54 -- Commercial and business park acres sold 39 17 5 20 76 Undeveloped acres sold -- 381 -- 2 20
Homebuilding, all locations Contracts for sale, net of cancellations 46 73 67 133 134 Number of homes sold 67 112 156 190 200 Backlog at end of period 92 58 68 92 86
Rental apartment units managed at end of period -- 8,139 8,139 8,085 8,085 Units under construction -- -- -- 54 --
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain matters discussed and statements made within this Annual Report on Form 10-K are forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 and as such may involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company to be different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These risks are detailed from time to time in the Company's filings with the Securities and Exchange Commission or other public statements.
Effective October 5, 1998, the Company distributed the majority of its real estate development business to ACPT. As a result, the Company's historical results of operations for 1998 are not readily comparable with the results of operations for 1997. Accordingly, the unaudited pro forma results for 1998 and 1997 have also been presented as if the Distribution had been completed on January 1, 1997. This information is provided for purposes of completing the Management's Discussion and Analysis and should be read in conjunction with the Company's consolidated financial statements and notes thereto included in Part II, Item 8 which show the historical operations of the Company.
INTERSTATE GENERAL COMPANY L.P. PRO FORMA CONSOLIDATED STATEMENTS OF LOSS (In thousands, except per Unit amounts)
YEARS ENDED DECEMBER 31, ------------------------ 1998 1997 -------- -------- REVENUES Community development-land sales 492 297 Homebuilding-home sales 7,379 7,805 Equity in earnings from partnerships and developer fees 146 146 Equity in earnings from gaming properties 549 -- Interest and other income 1,388 817 -------- -------- Total revenues 9,954 9,065 -------- -------- EXPENSES Cost of land sales 810 645 Cost of home sales 6,695 7,463 Selling and marketing 1,233 1,105 General and administrative 839 427 Interest expense 252 59 Depreciation and amortization 99 278 Wetlands litigation expenses 26 1,772 Write-off of deferred project costs 1,191 -- Write-off of goodwill -- 1,843 -------- -------- Total expenses 11,145 13,592 -------- -------- LOSS BEFORE PROVISION FOR INCOME TAXES (1,191) (4,527) PROVISION FOR INCOME TAXES 158 136 -------- -------- LOSS BEFORE MINORITY INTEREST (1,349) (4,663) MINORITY INTEREST 44 -- -------- --------
NET LOSS $ (1,305) $ (4,663) ======== ========
Pro forma for the year December 31, 1998 versus 1997
Community Development Operations
Community development land sales revenue increased 66% to $492,000 during the pro forma twelve months ended December 31, 1998, compared to sales of $297,000 during the pro forma twelve months ended December 31, 1997. The 1998 pro forma period reflects sales of approximately 15 single family home lots as well as a commercial site with a sales price of $90,000, while the 1997 pro forma period reflects only sales of approximately 22 townhome lots. The Company had negative margins on land sales primarily due to a lack of volume on land sales not covering related period costs being included in cost of sales.
Homebuilding Operations
Revenues from home sales decreased 6% to $7,379,000 for the pro forma twelve month period ending December 31, 1998, as compared to $7,805,000 during the pro forma twelve month period ending December 31, 1997. The 1997 revenues were a result of 69 scatter-site sales as well as 5 tract sales, while the 1998 revenues were a result of only 67 scatter-site sales. Although the revenues from home sales decreased, the gross profit margin increased to 9% in 1998, as compared to 4% for the same period of 1997 due to increases in sales prices.
Equity in Earnings from Gaming Properties
Equity in earnings from gaming properties increased from $0 during the pro forma twelve month period ended December 31, 1997 to $549,000 for the same pro forma period for 1998. The increase is due to the recognition of equity in gaming properties after recovering a negative basis.
Interest and Other Income
Interest and other income increased 70% to $1,388,000 for the pro forma twelve months period ending December 31, 1998 as compared to $817,000 during the pro forma twelve months period ending December 31, 1997. The increase is primarily due to the gain on sale of equity securities.
General and Administrative Expense
General and administrative expenses increased 97% from $427,000 during the pro forma twelve months ending December 31, 1997 to $839,000 during the same pro forma period for 1998. This increase is result of additional salaries and office expenses incurred upon opening the new corporate headquarters in Chantilly, Virginia.
Interest Expense
Interest expense increased 327% to $252,000 in the pro forma twelve months ending December 31, 1998, as compared to $59,000 for the same pro forma period in 1997. The increase is primarily due to an increase in the pro forma debt outstanding during 1998.
Provision for Wetlands Litigation Expense
Expenses related to the Wetlands litigation as discussed in Item 3, decreased to $26,000 in 1998 from $1,772,000 in 1997. The Company established a reserve of $1,500,000 in 1997 to cover additional costs that could be incurred in the event of a retrial.
Write-off of Deferred Project Cost
In 1998, management wrote off $1,191,000 of deferred project costs related to the waste technology project in Bridgeport, Connecticut. The construction of the project became economically unfeasible due to the decision of municipalities surrounding Bridgeport to have waste materials disposed of through land fill operations.
Write-off of Goodwill
In conjunction with the Company's reorganization plan, management wrote off $1,843,000 of goodwill in 1997 related to the purchase of AFH. There was no similar transaction for 1998.
Historic for the year ended December 31, 1997 versus 1996
Community Development Operations
Community development land sales revenue decreased 10% to $13,357,000 during the twelve months ended December 31, 1997, compared to sales of $14,717,000 during the twelve months ended December 31, 1996. The decrease was attributable to a decrease in residential lot sales in Puerto Rico. These lots are sold to homebuilders in bulk, and in 1997 there were fewer sales transactions. In addition, the U.S. residential lot sales volume has continued to be unfavorably impacted by the competitive market conditions and the delay in development of the next village, Fairway. Even though the sales were down, the gross profit margin during 1997 increased to 34%, as compared to 28% in the same period of 1996. This increase was due primarily to the sales mix. During 1997, 23% of the sales revenue was generated by an undeveloped bulk parcel, which had a low acquisition price. There were no similar sales during 1996.
Homebuilding Operations
Revenues from home sales decreased 20% to $7,805,000 during the twelve months ended December 31, 1997, as compared to $9,715,000 during the twelve months ended December 31, 1996. The number of homes sold decreased 31%, to 74 from 107 in the twelve months ended December 31, 1996. These reductions were primarily due to the phase out of the tract homebuilding operations. The gross profit margins were 4% in both 1997 and 1996.
Rental Property Revenues and Operating Results
Rental property revenues, net of operating expenses, increased 32% to $5,140,000 in the twelve months ended December 31, 1997, as compared to $3,883,000 during the same period in 1996. As of April 1, 1996 four additional partnerships were consolidated when they became majority owned through an acquisition of additional limited partnership interests.
Equity in Earnings from Partnerships and Developer Fees
During March 1996, IGC completed the sale of four Puerto Rico apartment projects. The properties, totaling 918 rental units, were sold under the 1990 Low Income Housing Preservation and Resident Homeownership Act ("LIHPRHA"). Equity in earnings decreased $15,036,000, to $1,494,000 during the twelve months ended December 31, 1997, as compared to $16,530,000 during the twelve months ended December 31, 1996. This decrease was primarily due to the $14,637,000 earned on the sales of the four properties during 1996, with no similar transaction in 1997.
Management and Other Fees
Management and other fees decreased 22% to $3,774,000 in 1997, as compared to $4,816,000 in 1996. This decrease was due primarily to $1,362,000 of special management fees earned in 1996 from the LIHPRHA sales and the elimination of the management fees from four partnerships consolidated during the entire twelve months ended December 31, 1997,
offset in part by fees of $724,000 earned from the refinancing of two apartment complexes in 1997.
Interest Expense
Interest expense decreased $656,000 to $3,609,000 during 1997, as compared to $4,265,000 in 1996. The decrease was primarily attributable to $500,000 in late fees incurred in 1996 and a decrease in the average debt outstanding during the 1997 period, offset in part by interest attributable to the additional four properties consolidated April 1, 1996, as discussed above.
General and Administrative Expense
General and administrative expenses decreased 4% to $7,034,000 during the twelve months ended December 31, 1997, as compared to $7,338,000 during the same period of 1996. This decrease was a result of management's continued focus on cost efficiency and the reduction of expenses. Specifically management experienced reductions in legal fees of $133,000, and salaries and benefits of $853,000, for the year ended December 31, 1997. These reductions in spending were offset by discounts on notes receivable of $801,000. The notes receivable are due from an affiliate of a former director, and did not bear interest until certain infrastructure improvements were completed. Delays in those improvements caused a delay in the commencement of interest charges, necessitating the additional discounts.
Provision for Wetlands Litigation Expense
Expenses related to the environmental legal proceedings discussed in Item 3 increased to $1,772,000 in 1997 from $973,000 in 1996. The Company established a reserve of $1,500,000 in 1997 to cover additional costs that could be incurred in the event of a retrial.
Write-off of Goodwill
In conjunction with the Company's reorganization plan, management wrote off $1,843,000 of goodwill in 1997 related to the purchase of a homebuilding company that builds homes on the purchasers' lots.
Spin-off Costs
Costs of $1,164,000 related to the restructuring of the Company were recognized as an expense in 1997.
Liquidity and Capital Resources
Cash and Cash equivalents were $33,000 and $2,273,000 respectively at December 31, 1998 and December 31, 1997. This decrease was attributable to $15,233,000 and $4,523,000 used in investing and financing activities respectively, partially offset by net cash provided by operating activiites. Cash flows from Operating Activities increased approximately $7,800,000 in 1998 over 1997 principally due to an increase in net income from 1997 as well as the return of approximately $3,000,000 in fines to the Company as a result of its successful appeal of the wetlands litigation. Cash flows used in investing activities increased by approximately $5,000,000 due principally to increased development costs expended for the land assets distributed to ACPT. Cash flows used in financing activities were approximately $5,100,000 higher in 1998 than in 1997 due primarily to the acquisition for cash of a minority interest in a subsidiary of ACPT prior to the Distribution date as well as payments on debt in excess of borrowings for land development and sales activity.
IGC historically has met its liquidity requirements principally from cashflow generated from home and land sales, property management fees, distributions from residential rental partnerships and from bank financing providing funds for development and working capital. As a result of the distribution and the development status of the land assets that the company retained, IGC expects to meet its liquidity requirements principally from land sales as well as bank and other financing facilities. The Company's principal demands for liquidity are expected to be the continued funding of development costs for IWT, ongoing debt service for existing bank loans, land development costs for the Company's land assets, operating cash needs for AFH, payables and normal operating costs. AFH historically has had cash needs in excess of those generated through operations and has substantial vendor payables. Management is currently engaged in a reorganization to minimize the cash needs of the business in order to make it profitable and cash flow positive.
Management believes the Company's real estate assets have substantial value and their development will be financed on a conventional project finance basis. IGC will also look to the payment in part of a $6.5 million note from Interstate General Properties Limited Partnership S.E., now a subsidiary of ACPT The Company's liquidity needs are dependent on obtaining additional sources of capital and while management believes those sources of capital are available there are assurances that these funds will be generated.
Debt Summary
As of December 31, 1998, assets with a book value of $13,222,000 were encumbered by $4,095,000 of recourse debt. The significant terms of IGC's recourse debt financing arrangements are shown below (dollars in thousands):
Balance Maximum Interest Maturity Outstanding Description Borrowings Rate Date 12/31/98 ------------ ---------- -------- -------- -----------
1st Nat'l Bank of St. Mary's (a) $ 460 P+1.5% 12/29/99 $ 149 1st Nat'l Bank of St. Mary's (a) 1,250 P+1.5% 3/21/00 1,042 1st Nat'l Bank of St. Mary's (b) 300 P+1.5% 3/30/99 300 Washington Savings Bank (c) 850 9.25% 4/1/99 152 Winston Corp Bank & Trust (d) 1,000 10.00% 10/28/99 732 Chevy Chase (e) 500 P+1% 1/7/00 500 Other miscellaneous 2,504 Various Various 1,220 ------- ------- $ 6,864 $ 4,095 ======= =======
(a) The two notes require monthly interest payments. Principal curtailments are made from sales of individual lots in the amount of $13,500 and $23,000 respectively.
(b) Note is for operating use. This note was paid in full in January, 1999.
(c) The note requires monthly interest payments. Principal payments are made by partial lot releases in the amount of $38,650.
(d) The note requires monthly interest payments of $6,103. The note is currently held by Chevy Chase FSB.
(e) The note is divided into two parts, a letter of credit and a promissory note in the amount of $200,000 and $300,000 respectively. The note requires monthly interest payments. The note is collateralized by undeveloped land located in Prince George's County, Maryland.
Year 2000
The year 2000 "Y2K" issue exists because many computer systems and applications and other electronically controlled systems and equipment currently use two-digit fields to designate a year. As the century date occurs, date sensitive systems with this deficiency may recognize the year 2000 as 1900 or not at all. This inability to recognize or properly treat the year 2000 can cause the systems to process critical financial and operations information incorrectly.
IGC has assessed and continues to assess the impact of the Y2K issue on its reporting systems and operations.
Current IGC State of Readiness. The systems and applications that can critically affect IGC's operations due to the Y2K issue are its financial reporting systems. These systems include one accounting application, one time and attendance application and the computer network system which they are installed on and the telephone, security, elevator, HVAC, and other like systems installed at IGC. Of secondary importance are those administrative systems and equipment not directly involved in revenue production but can still minimally impact IGC operations.
The financial application employed by IGC is currently certified by the respective publisher to be Y2K compliant. Active testing to verify the Y2K compliance of the Company's financial system will be conducted in the second quarter of 1999. "Dummy" companies will be setup in the critical systems with dates forwarded to beyond 2000 for these tests.
The Company relies on a time and attendance system for payroll processing. The payroll system utilizes the services of a third party provider and is certified Y2K compliant.
The hardware component of IGC's financial system consists of industry standard PC operating systems, servers, desktop computers, and networking hardware. These systems have been evaluated and tested for Y2K compliance.
The administrative applications (word processing, spreadsheet, messaging, etc) utilized by IGC have been certified by the various publishers to be Y2K compliant.
Third Party Impact on Company Operations. Of the administrative procedures, only the payroll processing is performed by a third party vendor. A statement of Y2K compliance has been obtained from the vendor in question and IGC considers Y2K exposure with payroll processing to be minimal.
Costs to Achieve Y2K Compliance. Because of IGC's almost exclusive use of "off the shelf" applications and hardware and that the Company maintains service maintenance agreements on all critical business systems, costs to achieve Y2K compliance have been nominal. Y2K upgrades for a majority of the Company's financial system has been included with standard system updates as part of the normal maintenance procedures.
IGC does not separately track the internal costs incurred for the Y2K project, these costs are principally related payroll costs for the Company's information systems department. The cost for the financial departments to perform the scheduled tests of the accounting system for Y2K compliance has not been ascertained, though it is expected that these costs will be nominal.
Risks of IGC's Y2K Issues. The failure of IGC's financial system for more than a few days would create a hardship on Company's operations. Failure of the accounting system will affect the companies general ledger, accounts payable, accounts receivable and reporting functions.
IGC had not obtained insurance specific to Y2K liability issues. IGC has determined that current policies will cover damages due to the Company's systems Y2K non-compliance.
IGC's Contingency Plan. IGC is currently evaluating it's various Y2K failure scenarios and developing contingency plans to ensure continued Company operations.
ITEM 7a.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risks relating to its operations result primarily from changes in the prime interest rate. It is management's goal to minimize the impact of variable rate debt by pursuing equity and long-term fixed rate financings and refinancings of current fixed rate debt at lower rates when favorable market conditions exist. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents the Company's debt obligations, principal repayments, related weighted average interest rates by expected maturity dates and fair values. The Company has no derivative financial instruments.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Interstate General Company L.P.:
We have audited the accompanying consolidated balance sheets of Interstate General Company L.P. (a Delaware limited partnership) and subsidiaries ("the Company") as of December 31, 1998 and 1997, and the related consolidated statements of income (loss), changes in partners' capital and cash flows for each of the three years ended December 31, 1998. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Interstate General Company L.P. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years ended December 31, 1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The financial statement schedule included on pages 54 through 58 of the Form 10-K is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP Washington, D.C. March 26, 1999 INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per Unit amounts)
YEARS ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 -------- -------- --------
REVENUES Community development-land sales Non-affiliates $ 12,267 $ 9,990 $ 5,631 Affiliates 1,179 3,367 9,086 Homebuilding-home sales 7,379 7,805 9,715 Rental property revenues 6,693 8,737 7,577 Equity in earnings from partnerships and developer fees 1,149 1,494 16,530 Equity in earnings from gaming properties 549 -- 4 Management and other fees, substantially all from related entities 2,518 3,775 4,816 Interest and other income 1,214 1,044 1,015 -------- -------- -------- Total revenues 32,948 36,212 54,374 -------- -------- -------- EXPENSES Cost of land sales 8,189 8,881 10,610 Cost of home sales 6,696 7,486 9,347 Selling and marketing 1,287 1,232 1,320 General and administrative 5,127 7,034 7,338 Interest expense 2,630 3,609 4,265 Rental properties operating expense 2,748 3,597 3,245 Depreciation and amortization 1,519 2,128 1,997 Wetlands litigation expenses 26 1,772 973 Write-off of deferred project costs 1,191 6 562 Write-off of goodwill -- 1,843 -- Spin-off costs 1,831 1,164 -- -------- -------- -------- Total expenses 31,244 38,752 39,657 -------- -------- -------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 1,704 (2,540) 14,717 PROVISION FOR INCOME TAXES 740 606 3,634 -------- -------- -------- INCOME (LOSS) BEFORE MINORITY INTEREST 964 (3,146) 11,083 MINORITY INTEREST (446) (439) (306) -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 518 (3,585) 10,777 EXTRAORDINARY ITEM-EARLY EXTINGUISHMENT OF DEBT -- -- 932 -------- -------- -------- NET INCOME (LOSS) $ 518 $ (3,585) $ 9,845 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (continued) (In thousands, except per Unit amounts)
YEARS ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 -------- -------- --------
BASIC NET INCOME (LOSS) PER UNIT Income (loss) before extraordinary item $ .25 $ (1.74) $ 5.25 Extraordinary item -- -- (.45) -------- -------- -------- Net income (loss) $ .25 $ (1.74) $ 4.80 ======== ======== ========
NET INCOME (LOSS) General Partners $ 5 $ (36) $ 98 Limited Partners 513 (3,549) 9,747 -------- -------- -------- $ 518 $ (3,585) $ 9,845 ======== ======== ========
WEIGHTED AVERAGE UNITS OUTSTANDING 2,044 2,058 2,051 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED BALANCE SHEETS (In thousands)
A S S E T S
DECEMBER 31, ------------------ 1998 1997 -------- -------- CASH AND CASH EQUIVALENTS Unrestricted $ 33 $ 2,273 Restricted 125 508 -------- -------- 158 2,781 -------- -------- ASSETS RELATED TO COMMUNITY DEVELOPMENT Land and development costs Puerto Rico -- 32,918 St. Charles, Maryland 6,387 28,417 Other United States locations 16,573 14,698 Notes receivable on lot sales and other 709 6,476 -------- -------- 23,669 82,509 -------- -------- ASSETS RELATED TO RENTAL PROPERTIES Operating properties, net of accumulated depreciation of $21,392, as of December 31, 1997 -- 37,829 Investment in unconsolidated rental property partnerships, net of deferred income of $2,193 as of December 31, 1997 -- 8,657 Other receivables, net of reserves of $0 and $223 as of December 31, 1998 and 1997, respectively 46 805 -------- -------- 46 47,291 -------- -------- ASSETS RELATED TO HOMEBUILDING Homebuilding construction and land 2,597 1,914 Investment in joint venture -- 591 Receivables and other 122 68 -------- -------- 2,719 2,573 -------- -------- RECEIVABLES & OTHER ASSETS Receivables 9,593 -- Deferred costs regarding waste technology and other projects, receivables and other 3,470 8,797 Property, plant and equipment, less accumulated depreciation of $717 and $2,460 as of December 31, 1998 and 1997, respectively 609 1,087 -------- -------- 13,672 9,884 -------- -------- Total assets $40,264 $145,038 ======== ======== The accompanying notes are an integral part of these consolidated balance sheets.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED BALANCE SHEETS (In thousands)
LIABILITIES AND PARTNERS' CAPITAL
DECEMBER 31, --------------------------- 1998 1997 ------------ ------------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT Recourse debt $ 2,633 $ 35,176 Non-recourse debt -- 2,295 Accounts payable, accrued liabilities and deferred income 386 5,245 -------- -------- 3,019 42,716 -------- -------- LIABILITIES RELATED TO RENTAL PROPERTIES Recourse debt -- 969 Non-recourse debt -- 39,101 Accounts payable and accrued liabilities 888 3,331 -------- -------- 888 43,401 -------- -------- LIABILITIES RELATED TO HOMEBUILDING Recourse debt 740 159 Accounts payable and accrued liabilities 2,709 2,501 -------- -------- 3,449 2,660 -------- -------- OTHER LIABILITIES Accounts payable and accrued liabilities 2,607 6,330 Notes payable and capital leases 722 615 Accrued income tax liability - current 2,188 1,541 Accrued income tax liability - deferred -- 4,487 -------- -------- 5,517 12,973 -------- -------- Total liabilities 12,873 101,750 -------- -------- PARTNERS' CAPITAL General partners' capital 4,166 4,345 Limited partners' capital-2,044 and 2,066 Units issued and outstanding as of December 31, 1998 and 1997, respectively 23,225 38,943 -------- -------- Total partners' capital 27,391 43,288 -------- -------- Total liabilities and partners' capital $ 40,264 $145,038 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (In thousands)
General Limited Partners' Partners' Capital Capital Total -------- -------- -----
BALANCES, December 31, 1995 4,292 33,617 37,909
Net income 98 9,747 9,845
Exchange of assets between the Company and general partner (1) (19) (20)
Cash distributions to partners (11) (1,129) (1,140) ------- ------- -------
BALANCES, December 31, 1996 $ 4,378 $42,216 $46,594
Net loss (36) (3,549) (3,585)
Issuance of warrants 3 276 279 ------- ------- ------- BALANCES, December 31, 1997 $ 4,345 $38,943 $43,288
Net income 5 513 518
Cash Distributions (22) (207) (229)
Issuance of Warrants 3 265 268
Distribution of ACPT shares to unitholders (165) (16,289) (16,454)
-------- ------- -------- BALANCES, December 31, 1998 $ 4,166 $23,225 $ 27,391 ======== ======= ========
The accompanying notes are an integral part of these consolidated statements.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
YEARS ENDED DECEMBER 31, -------------------------- 1998 1997 1996 -------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 518 $(3,585) $ 9,845 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary item -- -- 932 Depreciation and amortization 1,519 2,128 1,997 (Benefit) provision for deferred income taxes 294 (847) 629 Equity in earnings from gaming properties (549) -- (4) Equity in earnings from unconsolidated partnerships and developer fees (788) (1,402) (16,605) Distributions from unconsolidated partnerships 1,912 5,155 15,666 Cost of sales-community development and homebuilding 14,885 16,367 19,957 Homebuilding construction expenditures (7,379) (7,384) (8,109) Equity in loss from homebuilding joint venture (385) (92) 75 Write-off of deferred project cost 1,191 6 562 Write-off of goodwill -- 1,843 -- Collection/(payment) of fines 3,212 (3,212) -- Changes in other accounts receivable, and accounts payable 3,086 739 1,270 ------- ------- ------- Net cash provided by operating activities 17,516 9,716 26,215 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Investment in land improvements for future sales (12,197) (7,644) (11,444) Change in assets related to unconsolidated rental property partnerships 157 (687) (312) Change in restricted cash (2,083) 480 1,137 (Additions to) disposals of rental operating properties, net (780) (308) (1,275) Acquisitions of other assets, net (330) (1,857) (503) Contributions to homebuilding joint venture -- (224) (100) ------- ------- ------- Net cash used in investing activities (15,233) (10,240) (12,497) ------- ------- -------
The accompanying notes are an integral part of these consolidated statements.
INTERSTATE GENERAL COMPANY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands)
YEARS ENDED DECEMBER 31, -------------------------- 1998 1997 1996 -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from debt financing 13,878 21,206 34,441 Payment of debt (15,340) (20,900) (48,283) Distributions to Unitholders (229) -- (1,140) Issuance of warrants 268 279 -- Purchase of minority interest in subsidiary (3,100) -- -- ------- ------- ------- Net cash (used in) provided by financing activities (4,523) 585 (14,982) ------- ------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,240) 61 (1,264)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,273 2,212 3,476 ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 33 $ 2,273 $ 2,212 ======= ======= =======
SUPPLEMENTAL DISCLOSURES: Interest paid $ 292 $ 5,878 $ 4,940 Income taxes paid -- 3,828 371 Non-cash transactions Partnership interests received in satisfaction of accounts and notes receivable from general partner -- -- 69 Accounts and notes receivable, net of reserves, satisfied via transfer of partnership interests from general partner -- -- 69 Assets transferred to general partner -- -- 49 Assets transferred to ACPT 16,454 -- --
The accompanying notes are an integral part of these consolidated statements.
INTERSTATE GENERAL COMPANY L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
On September 26, 1986, Interstate General Company L.P. ("IGC" or "the Company"), a Delaware limited partnership, was formed, and on December 31, 1986, acquired substantially all of the community development, homebuilding, investment properties and management services businesses of Interstate General Business Corporation, Interstate St. Charles, Inc. and a trust for the benefit of the stockholders of Interstate General Business Corporation. The Company's 1% general partner interest is shared by the managing general partner, Interstate General Management Corporation, and Interstate Business Corporation ("IGMC" and "IBC", respectively, referred to collectively as the "General Partner").
On October 5, 1998, IGC transferred its principal real estate operations to American Community Properties Trust ("ACPT"), and subsequently distributed all of the common shares of ACPT to the partners and unitholders of IGC (the "Distribution"). The purpose of the restructuring was to create an attractive investment vehicle for the principal real estate assets and operations of IGC that would not be burdened with the operating losses of Amercian Family Homes, LLC ("AFH") and the capital needs of Interstate Waste Technologies, Inc. ("IWT"), and Caribe Waste Technologies ("CWT"), or with the Wetlands litigation discussed below.
After the restructuring, IGC continues to own certain assets that, in management's view, do not fit ACPT's business plan. These assets include the Towne Center land in St. Charles, Maryland, which has been the subject of wetlands litigation, certain single family home lots in the Dorchester neighborhood, also in St. Charles, Maryland, certain land in Pomfret, Maryland and in St. Mary's County, Maryland, a 50% interest in a partnership that owns land in Brandywine, Maryland, all of the shares of AFH, rights to collect the principal balance of a note in the amount of $6.77 million payable by a subsidiary of ACPT, as well as fractional interests in Chastleton Apartment Associates, Coachman's Limited Partnership, Headen House Associates Limited Partnerhsip, Palmer Apartments Associates Limited Partnership, Wakefield Terrace Associates Limited Partnership and Wakefield Third Age Associates Limited Partnerhsip. IGC retained a portion of the general partner interests in the latter four partnerships because a complete transfer would have terminated each respective partnership agreement, IGC intends to transfer the remaining interest in these partnerships to ACPT in 1999. Until such time as the partnership interest have been transferred, all beneficial interest related to these partnerships have been assigned to ACPT.
All of the common stock of IWT and CWT (excluding shares issued as incentive compensation for employees) is held in a trust (the "CWT Trust") for the benefit of the IGC Unitholders. IGC capitalized these entities with $1 million cash, residential lots in the Montclair development in Prince William County, Virginia, and a note receivable from a third party in the amount of $1.06 million.
On October 19, 1998, IGC implemented a one-for-five reverse unit split with respect to the IGC Units (the "Reverse Split"). The purpose of the
Reverse Split was to increase the post-Distribution trading price of IGC units.
Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of Interstate General Company L.P. and its majority owned partnerships and subsidiaries, after eliminating all intercompany transactions. All of the entities included in the consolidated financial statements are hereinafter referred to collectively as the "Company" or "IGC". As of December 31, 1998, the consolidated group includes Interstate General Company L.P., St. Charles Associates Limited Partnership, American Family Homes, LLC., St. Charles Operating LLC, Interstate Waste Technologies Inc., Caribe Waste Technologies, Inc., and various inactive entities. The Company's investments in its non-majority owned partnerships that it does not control are recorded using the equity method of accounting. However, the recognition of losses is limited to the amount of direct or implied financial support.
The accompanying consolidated financial statements reflect the consolidated operations of IGC. No adjustments have been made to these statements to remove, for periods prior to the distribution, any of the activities transferred to ACPT.
Sales and Profit Recognition and Cost Capitalization
Sales revenues and profits from community development and homebuilding activities are recognized at closing only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer, and IGC has no significant continuing involvement.
The costs of acquiring and developing land and homebuilding construction are allocated to these assets and charged to cost of sales as the related inventories are sold. IGC's interest costs related to homebuilding and land assets are allocated to these assets based on their development stage and relative book value. The portion of interest allocated to land, finished building lots and homebuilding construction during the development and construction period is capitalized. Remaining interest costs are expensed. IGC carries land, development and homebuilding costs at the lower of cost or net realizable value.
Quarterly, IGC evaluates the carrying value of its long-lived assets in accordance with Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." In cases where management is holding for sale particular properties, the Company assesses impairment based on whether the net realizable value (estimated sales price less costs of disposal) of each individual property to be sold is less than the net book value. A property is considered to be held for sale when the Company has made the decision to dispose of the property. Otherwise, the Company assesses impairment of its real estate properties based on whether it is probable that undiscounted future cash flows from each individual property will be less than its net book value. If a property is impaired, its basis is adjusted to its fair market value.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of advertising costs, which include costs of printed materials, signs, displays, general marketing costs and costs associated with model homes. Advertising costs are expensed as incurred except for capitalized model home costs which are depreciated over their estimated useful lives.
Management Fees
IGC records management fees in the period in which services are rendered.
Deferred Project Costs
Pre-construction costs are capitalized. Upon completion of construction, the deferred charges are amortized as a component of the assets' depreciation charge. Deferred project costs determined to be unrecoverable are written off.
Depreciation and Amortization
Buildings are depreciated over 35 to 40 years using the straight-line method. Furniture, fixtures and equipment are depreciated over five to seven years using the straight-line method. Deferred expenses are amortized over the period of estimated benefit using the straight-line method of depreciation.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, unrestricted deposits with financial institutions and short-term investments with original maturities of three months or less.
Income Taxes
IGC is not subject to U.S. income taxes under current law. Its partners are taxed directly on their share of IGC's income without regard to distributions, and the partners may generally deduct their share of losses. The corporate subsidiaries of IGC are subject to tax at the applicable corporate rates. Furthermore, IGC is subject to Puerto Rico income tax on its Puerto Rico source income and District of Columbia income tax on its District of Columbia source income.
Comprehensive Income
IGC has no items that would be considered comprehensive income that would require separate reporting in the accompanying consolidated statements of income.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Stock-Based Compensation
The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation" during 1996. The Company has elected to continue to measure compensation costs using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and therefore the adoption of this statement did not have any effect on the financial results of the Company (see Note 7).
Compensation expense related to Unit options issued to directors and employees is recognized at the time the options are granted, in an amount equal to the excess of the currently calculated trading value of the Units over the option exercise price. Compensation expense related to Unit Appreciation Rights is recognized quarterly, on a cumulative basis since the issuance of the Rights, based on changes in Unit prices as compared to the "strike" price of the Rights.
Earnings Per Unit
In the fourth quarter of 1997, IGC adopted Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share." This statement requires the computation and reporting of both "basic" and "diluted" earnings per unit.
"Basic earnings per unit" is computed as net income multiplied by the limited partner ownership interest, 99%, divided by the weighted average units outstanding.
The following table provides a reconciliation between weighted average units outstanding-basic and weighted average units outstanding-diluted.
Year Ended December 31, --------------------- 1998 1997 1996 ---- ---- ----
Weighted average units outstanding-basic 2,044 2,058 2,051 Effect of dilutive equivalent units 1 N/A 3 ------ ------ ------ Weighted average units outstanding-diluted 2,045 2,058 2,054 ====== ====== ======
The effect of dilutive equivalent units is not applicable in 1997 because the Company recorded a net loss for that year. Potentially dilutive options and warrants are described in Note 7.
Impact of Recently Issued Accounting Standards
During 1998, IGC adopted the provisions of Statement of Financial Accounting Standard ("SFAS") No. 131 "Disclosures About Segments of an Enterprise and Related Information". Due to the adoption of SFAS No. 131, IGC is required to report financial and descriptive information about its reportable operating segments. This statement requires that a public business enterprise report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. Reconciliations of total segment revenues, total segment profit and loss, total segment assets, and other amounts disclosed for segments to corresponding amounts in the enterprise's general-purpose financial statements are also required.
In addition, SFAS No. 131 requires that a public business enterprise report descriptive information about the way that the operating segments were determined, the products and services provided by the operating segments, differences between the measurements used in reporting segment information and those used in the enterprise's general-purpose financial statements, and changes in the measurement of segment amounts from period to period.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial postition and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liabiltiy or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure to a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Although currently IGC has no derivative instruments, this statement would apply to derivative instruments acquired in future periods.
Reclassifications
Certain amounts presented for 1997 in the Consolidated Balance Sheet and for 1997 and 1996 in the Consolidated Statements of Income and Cash Flows have been reclassified to conform with the 1998 presentation.
(2) INVESTMENT IN UNCONSOLIDATED PARTNERSHIPS
Housing Partnerships
The following information summarizes financial data and principal activities of unconsolidated housing partnerships which the Company accounts for under the equity method (in thousands).
SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31, ------------------ 1998 1997 ---- ----
Total assets $ 33,695 $ 138,782 Total non-recourse debt 42,373 144,595 Total other liabilities 17,423 24,917 Total equity (26,101) (30,730) Company's investment (874) 8,657
SUMMARY OF OPERATIONS: FOR THE YEAR ENDED --------------------------- 1998 1997 1996 ---- ---- ----
Total revenue $ 30,246 $ 32,063 $ 34,912 Net (loss) income (1,494) (1,120) 60 Company's recognition of equity in earnings and developer fees 560 1,402 1,968
SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED --------------------------- 1998 1997 1996 ---- ---- ----
Cash flows from operating activities $ 3,615 $ 3,746 $ 7,494 Company's share of cash flows from operating activities 309 1,099 2,915 Operating cash distributions 5,854 10,648 1,620 Company's share of operating cash distributions 1,911 5,155 501
SUMMARY OF 1996 SALES TRANSACTION: Gain on sale $ 39,934 Company's equity and earnings recognition 14,637 Total distribution of sales proceeds 36,235 Company's share of sales proceeds distribution 15,165
Prior to the distribution of ACPT, the company had interests in 19 partnerships owning 4,563 rental units in 22 apartment complexes. At December 31, 1998, IGC had interests in 6 partnerships owning 1,000 rental units in 6 apartment complexes. The Company holds a general partner interest in these partnerships and generally shares in zero to 5% of profits, losses and cash flow from operations until such time as the limited partners receive cash distributions equal to their capital contributions. Pursuant to the partnership agreements, the general partners are prohibited from selling or refinancing the apartment complexes without majority limited partner approval. Due to the absence of control and non-majority ownership, these partnerships are accounted for under the equity method of accounting.
The properties that the Company held interests in at December 31, 1998, Chastleton Apartments Associates, Coachman's Limited Partnership, Headen House Associates Limited Partnership, Palmer Apartments Associates Limited Partnership, Wakefield Terrace Associates Limited Partnership and Wakefield Third Age Associates Limited Partnership, were placed in service prior to 1995. As part of the prior reorganization, the Company will transfer its interest in all of the partnerships except Chastleton Apartments Associates and a 1% general partner interest in Coachman's Limited Partnership to ACPT during 1999.
During 1997, the rental complexes owned by Monte de Oro and New Center were refinanced to provide distributions to their partners and funds to convert the rental units into condominiums. Rental revenues significantly decreased during 1997 as the units were vacated in preparation for conversion.
On April 1, 1996, the Company acquired a controlling interest in four partnerships owning 596 rental units, Wakefield Third Age L.P., Wakefield Terrace Associates L.P., Palmer Apartments L.P. and Headen House Associates L.P. Effective April 1, 1996, the results of operations and balance sheets of these partnerships were consolidated in the accompanying financial statements through the distribution date. Prior to that time, they were accounted for under the equity method of accounting and as such their operating results are included above for the applicable periods. The remaining interest after the distribution date is accounted for under the equity method.
In March 1996, the Company completed the sale of four Puerto Rico apartment properties. The four properties, Las Americas I, Las Americas II, Las Lomas and Monacillos, totaling 918 units were purchased by non- profit organizations with financing provided by HUD through capital grants authorized by the Low Income Housing Preservation and Resident Homeownership Act ("LIHPRHA"). The Company retained the management contract for these properties. The results of the sales transaction are identified separate from operations in the table above. Prior to the sale, the properties were accounted for using the equity method of accounting and as such their results of operations are included above for the applicable periods.
Homebuilding Joint Venture
The Company held a 50% joint venture interest in Escorial Builders S.E. until October 5, 1998 at which time it was transferred to ACPT. Escorial Builders was formed in 1995 to purchase lots from the Company and construct homes for resale. It purchased land to construct 118 units in 1997 and land to construct 98 units in 1996. The profit on these lots are deferred until sold by Escorial Builders to a third party. The Company has continued to disclose this information for comparative purposes and because of its share of earnings and cash flows during 1998 prior to the Distribution. The following tables summarize Escorial Builders' financial information (in thousands):
SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31, ------------------ 1998 1997 ---- ----
Total assets $ 9,396 $ 13,719 Total liabilities 7,107 12,536 Total equity 2,289 1,183 Company's investment -- 591
SUMMARY OF OPERATIONS: FOR THE YEAR ENDED --------------------------- 1998 1997 1996 ---- ---- ----
Total revenue $ 12,324 $ 2,491 $ -- Net income (loss) 1,107 183 (151) Company's recognition of equity in earnings 385 92 (75)
SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED --------------------------- 1998 1997 1996 ---- ---- ----
Cash flows from operating activities $ 5,043 $(7,326) $ (4,361) Company's share of cash flows from operating activities 1,900 (3,663) (2,181) Operating cash distributions -- -- -- Company's share of operating cash distributions -- -- --
(3) DEBT AND EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT
Debt
The Company's outstanding debt is collateralized primarily by land, land improvements, housing, receivables and investments in partnerships. The following table summarizes the indebtedness of IGC at December 31, 1998 and 1997 (in thousands):
Outstanding Maturity Interest December 31, Dates Rates* ---------------- From/To From/To 1998 1997 -------- -------- ------- ------- Related to community development: Recourse debt 04-01-99/ P+1%/ $ 2,633 $35,176 03-21-00 10.0% Non-recourse debt -- 2,295
Related to rental properties: Recourse debt -- 969 Non-recourse debt -- 39,101
Related to homebuilding projects: Recourse debt Demand/ P+1%/ 740 159 08-03-99 P+1.5%
General: Recourse debt 03-30-99/ P+1.25%/ 722 615 03-05-02 10.99% ------- ------- Total debt $4,095 $78,315 ======= =======
*P = Prime lending interest rate.
As of December 31, 1998, the $2,633,000 of recourse debt related to community development assets is fully collateralized by $12,784,000 of the community development assets.
The homebuilding debt is secured by substantially all of the homebuilding assets.
The Company's loans contain various financial, cross-default and technical provisions of which the Company is currently in compliance. IGC's weighted average interest rate during 1998 on its variable rate debt was 9.789%.
The stated maturities (assuming no accelerations) of the Company's indebtedness at December 31, 1998 are as follows (in thousands):
1999 22,273 2000 1,811 2001 9 2002 2 Thereafter -- ------- $4,095 =======
The interest costs incurred during 1998, 1997 and 1996 were accounted for as follows (in thousands): 1998 1997 1996 ------ ------- -------
Expensed $2,804 $3,685 $4,269 Capitalized 25 2,931 3,930 ------ ------ ------ $2,829 $6,616 $8,199 ====== ====== ======
Extraordinary Item - Early Extinguishment of Debt
On December 23, 1996, the Company completed the restructuring of two non-recourse mortgages that will provide an interest savings of approximately $12,000,000 over the life of the loans. The new mortgage notes payable of $18,700,000 bear an average annual interest rate over the life of the loans at approximately 6.8% compared to approximately 9.7% for the old loans. Prepayment fees of $932,000 were paid to the prior lender and charged as an extraordinary item in the accompanying financial statements. The loans are secured by the respective rental properties.
(4) COMMITMENTS AND CONTINGENT LIABILITIES
Wetlands Litigation
On February 29, 1996, IGC, SCA and James J. Wilson were convicted on four felony counts of violations of Section 404 of the U.S. Clean Water Act relating to discharge without a permit of fill material into wetlands within the U.S. Army Corps of Engineers' regulatory jurisdiction. The nine civil violations of the U.S. Clean Water Act filed by the U.S. Attorney were dismissed without prejudice. The Company was fined $3,000,000, placed on probation for five years and ordered to implement a wetlands restoration and mitigation plan proposed by the government. Mr. Wilson was fined $1,000,000 and sentenced to 21 months imprisonment and one year of supervised release. Appeals were filed and Mr. Wilson's sentence was stayed pending appeal by the Court of Appeals. On December 23, 1997, the United States Court of Appeals for the Fourth Circuit reversed the lower court's decision and remanded the matter back to the lower court for retrial.
IGC's counsel is currently engaged in negotiations with the U.S. Attorney's office on a possible disposition of the Wetlands litigation that would require payment of a fine by IGC, a portion of which will be abated by a contribution of approximately 2 acres of land in Towne Center South zoned for commercial development, remediation of two parcels, totaling approximately 73 acres, in St. Charles and IGC's undertaking an environmental compliance program. IGC would also plead guilty to a single felony count. All other criminal charges in the indictment against the Company and its president, James J. Wilson, would be dropped. The foregoing settlement proposal has not been agreed upon by either IGC or the U.S. Government, and there are number of issues that are still under discussion. If agreement is reached, the disposition must be approved by the court. Management believes that the cost of such a settlement, not including cost of remediation, would not be materially greater than the amount ($1.1 million) currently reserved by IGC for the Wetlands litigation. If such a settlement is reached, a portion of the land in St. Charles presently encumbered by the Wetlands litigation would become available for development.
Lead Based Paint Allegations
Subsequent to year end, American Rental Management Company ("ARMC"), a subsidiary of ACPT, Chastleton Apartments Associates (a housing partnership in which IGC is the general partner) and Capital Apartments Associates (an apartment project managed by ARMC) received notification from the U.S. Department of Justice (the "Department") that they were in violation of the Residential Lead-Based Paint Housing Reduction Act of 1992 (the "Act"). This allegation was based on the finding by the Department of Housing and Urban Development ("HUD") that these apartments had failed to make disclosures of lead-based paint required by the Act. The Act also authorizes HUD to assess administrative civil penalties, and these penalties were estimated by the Department in March 1999 to be approximately $5,492,000. This original notification was addressed to ARMC, the managing agent at the time. However, the alleged violations occurred during IGC's tenure as management agent. ARMC and IGC have requested that ARMC be released from any liability and IGC substituted as the real party in interest. IGC has agreed with ACPT to accept the responsibility for any penalties that might be assessed against ARMC. As the general partner of Chastleton Apartments Associates, IGC is liable for any obligations of Chastleton and in such capacity would be liable if Chastleton was unable to pay any fines levied against it. The Company is actively trying to settle this matter, however there can be no assurance it will be successful.
Guarantees
The Company is guarantor of $1,477,241 of letters of credit and surety bonds for land development completion and homebuilding warranties. IGC is a guarantor of a $4,569,000 letter of credit securing bonds issued on behalf of Chastleton Apartments Associates Limited Partnership. This letter of credit is collateralized by certain assets owned by IBC, IBC affiliates, ACPT and the Company. The Company's assets included in the collateral consist of rights to a $4,636,000 note receivable from Brandywine Investment Associates Limited Partnership. IBC is obligated to obtain the release of IGC and ACPT as a guarantor of the forgoing letter of credit.
In addition to the letters of credit, IGC shares the general partner interests in two rental partnerships with IBC, both of which have
experienced cash flow problems in the past. Under the terms of the partnership agreement, IBC is the primary obligor for funding operating advances. However, should IBC fail to fulfill its funding obligations, IGC is obligated as a general partner to provide financial support. This obligation involves varying degrees of financial exposure in excess of amounts recognized in the consolidated financial statements.
Other
In the normal course of business, the Company is involved in various types of pending or unasserted claims. In the opinion of management, these will not have a material impact on the financial condition or future operations of the Company.
(5) RELATED PARTY TRANSACTIONS
Certain officers, directors and a general partner, IBC, of the Company have ownership interests in various entities that conducted business with IGC during the last three years. The financial impact of the related party transactions on the accompanying financial statements are reflected below:
(A) Land Sales
IGC sells land to affiliates and non-affiliates with similar terms. The sales prices to affiliates are based on third party appraisals, payable in cash or a combination of a 20% cash down payment and a note for the balance. The notes receivable are secured by deeds of trust on the land sold, and bear an interest rate equal to those charged at that time for land sales. The notes mature in one year or mature in five or less years with annual amortizations. As circumstances dictate, the maturity dates and repayment terms of the notes receivable due from affiliates or non- affiliates have been modified. Any sales transactions that vary from these terms are described below:
(1) The notes receivable due from an affiliate of a former director did not bear interest until certain infrastructure improvements were completed. This infrastructure was delayed and the interest commencement dates modified. These delays created the additional discounts reflected above.
(2) On June 30, 1997, IGC sold 374 acres to an affiliate of IBC for $3,000,000 and recognized a profit of $1,311,000. As payment for this parcel, IGC received a 20% down payment and assumption of a note payable.
(B) Management and Other Services
IGC provides management and other support services to its unconsolidated subsidiaries and other related entities in the normal course of business. These fees are typically collected on a monthly basis, one month in arrears. These receivables are unsecured and due upon demand. Certain partnerships experiencing cash shortfalls have not paid timely. As such, these receivable balances are reserved until satisfied or the prospects of collectibility improves. Decreases to the reserves for other than routine cash payments are discussed below:
(1) On April 1, 1996, IBC transferred its remaining 1.1% limited partnership interest in four housing partnerships to IGC for its market value of $69,000 as partial satisfaction of a note receivable. The balance of this note receivable and other receivables were purchased by an affiliate of James Michael Wilson for a cash payment of $1,279,000. The collection of the majority of these receivables was uncertain and $413,000 had been reserved. This transaction resulted in income recognition of these reserves during the second quarter of 1996.
(2) During the second quarter of 1997, an affiliate of IBC purchased the management fees receivable of $190,000 due from Chastleton, Coachman's, Rolling Hills, and Village Lake for a cash payment of $190,000. The collection of these receivables had previously been questionable and they had been fully reserved. This transaction resulted in income recognition of $190,000.
(3) During the second quarter of 1997, IGC sold to IBC its 49% limited partner interest and 99% of its 1% general partner interest in Coachman's Limited Partnership. This transaction had no financial effect on the Company's 1997 annual results of operation.
(C) Operations Distributed to Unitholders
The Company's 99% limited partnership interest in Equus was
distributed to its unitholders in February 1995 (the "Equus Distribution"). Since that time through April 1996, the Company continued to manage and provided certain reimbursable administrative services and support to Equus pursuant to a Master Support and Services Agreement.
Pursuant to the Transfer Control Agreement effective December 31, 1996 (the "Transfer Agreement"), IGC transferred its remaining interests in and control over EMC and Equus (subject to NASDAQ's approval) to IBC. In addition, the Transfer Agreement called for IGC to issue 75,000 IGC Units to Equus to satisfy the outstanding employee option and incentive rights for the employees who were transferred to EMC. The Transfer Agreement was amended in December 1997 to allow IGC to withdraw as a general partner of Equus provided it granted a guarantee to EMC. IGC agreed to guarantee $20,000,000 of EMC's liabilities in excess of assets should Equus or EMC become insolvent.
(D) Other
Other transactions with related parties are as follows:
(1) IGC rents executive office space and other property from affiliates both in the United States and Puerto Rico pursuant to leases that expire at various times through 2005. In management's opinion, all leases with affiliated persons are on terms generally available from unaffiliated persons for comparable property.
(2) During 1996, the sale of four properties in Puerto Rico triggered a taxable gain, a portion of which is passed through to the predecessor of IGC that contributed those assets. IGC's partnership agreement provides for (1) an allocation to that predecessor of the income tax payable in Puerto Rico on such portion of the gain and (2) a reduction from its cash distributions in an amount equivalent to the Puerto Rico income tax specifically allocated to the predecessor. In accordance with these provisions, IGC recorded a receivable from IBC of $881,000 which was subsequently recovered through future distributions due to IBC.
(3) Thomas J. Shafer became a director of IGMC in 1998 after his retirement from Whitman, Requardt, where he was a Senior Partner. Whitman, Requardt provides engineering services to IGC. In management's opinion, services performed are on the same terms provided to other clients.
(4) During the transition period after the Distribution, the Company received land development, accounting, tax, human resources, payroll processing, and other miscellaneous administrative support services from ACPT. After the transition period, ACPT has agreed to provide human resources, payroll processing and tax services to IGC on a cost reimbursement basis.
(6) INVESTMENT IN WASTE TECHNOLOGIES
In 1990, IGC formed a wholly owned corporation, Interstate Waste Technologies, Inc. ("IWT"), to develop innovative solutions for the disposal of municipal waste and to pursue waste disposal contracts with municipalities.
In 1996, a second corporation, Caribe Waste Technologies, Inc. ("CWT"), was formed in Puerto Rico. CWT is an entity established to perform projects in the Caribbean.
In February 1994, IWT was selected by the City of Bridgeport, Connecticut as its preferred vendor for a regional sludge management facility and executed a host community agreement. IWT pursued contracts for waste with surrounding communities but was unable to secure any due to decisions by the communities to pursue disposal of waste by means of land fill operations. Therefore IWT wrote-off all costs that were capitalized specifically to the Bridgeport project at December 31, 1998. The total amount of deferred costs written-off related to the Bridgeport project was approximately $1,191,000.
In December 1997, CWT entered into a host community agreement with the Municipality of Caguas, Puerto Rico. The agreement describes the basis on which CWT will contract, develop and construct a 3,300 ton per day solid waste facility using proprietary gasification technology from Thermoselect S.A. To provide waste for the facility, CWT management is pursuing long- term solid waste disposal service agreements with municipalities in Puerto
Rico and the Puerto Rico Solid Waste Management Authority.
In 1996, CWT proposed to build a solid waste facility on Saint Maarten, Netherlands Antilles. After an evaluation of proposals from four companies by the Government and its Dutch technical consultants, the Island Government entered into a Letter of Intent with CWT in October 1997. The Letter of Intent calls for CWT to submit a final proposal to the Island Government, followed by a period of exclusive negotiation for a solid waste disposal service agreement. CWT submitted its proposal for a 330 ton per day Thermoselect solid waste gasification facility to the Island Government in March 1998, and a revised proposal in August, 1998. Recently, a representative of the island government has asked for a further revision to the proposal. CWT management is preparing a revised proposal.
In November 1997, the Government of the U.S. Virgin Islands ("GVI") issued a Request for Qualification ("RFQ") for Integrated Comprehensive Solid Waste Management Services. CWT responded in December 1997. Following an evaluation of the submittals, the GVI notified CWT in February 1998 that CWT had been named to the list to receive an RFP. CWT management responded to the RFP on August 3, 1998. Thereafter, the procurement was canceled at approximately the time a new governor was elected. CWT is seeking to learn whether there will be a new procurement or negotiations will resume with the existing bidders.
At December 31, 1998 and 1997, deferred costs regarding waste technology, net of reserves or direct write-offs, were $3,326,000 and $3,024,000, respectively.
(7) OPTIONS, APPRECIATION RIGHTS AND WARRANTS
IGC maintains Unit incentive plans for directors (the "Directors Plan") and employees (the "Employees Plan"). These plans were amended in 1994 and 1995 to allow for the issuance of Unit Appreciation Rights and other incentive awards. The Directors Plan is for directors of the managing general partner who are not officers or employees of the Company or of any General Partner or affiliate of the Company. The Employees Plan is for employees of IGC (due to the Distribution, the employees may be current employees of ACPT), including employees who are Directors of any general partner of IGC or of any affiliate of IGC. Under the terms of the plans, directors and employees may be granted options, incentive rights or other Unit based awards as determined by a committee of the Directors of the managing general partner, which excludes directors who are eligible to participate in that particular plan ("Committee"). As of December 31, 1998, 249,505 IGC Units are reserved for issuance under both the Director's and Employees' Plan.
Options
As of December 31, 1998, all outstanding options are fully vested and exercisable however, 1,280 options expired on January 1, 1999. The remaining 2,000 options expire on August 1, 2001 and bear an exercise price of $3.71 per unit.
Appreciation Rights
Under the terms of the plans, directors and employees may be granted "Unit Appreciation Rights" which entitle the holder to receive upon exercise an amount payable in cash, Class A Units of the Company, other property or some combination thereof as determined by the Committee. The amount received upon exercise on or after January 20, 1995, is determined based on the excess of the fair market value of the Company's Units on the exercise date, plus 50% of the fair market value of Equus Units on the exercise date, over the base price of the Unit Appreciation Right specified in the individual rights agreements. Fair market value is defined in each individual rights agreement but is generally the average of the closing
prices of Units on the principal exchange on which they are traded for the 20 trading days beginning ten trading days before the exercise date and ending on the ninth day after the exercise date. No adjustment was made for Unit Appreciation Rights exercised prior to January 20, 1995, since prior to such date, the Company's market price still reflected the value of the Company's interest in Equus.
The number of stock appreciation rights outstanding which were exercisable, but not exercised prior to October 19, 1998, were reduced as a result of a 1 for 5 reverse unit split. During 1998, 800 rights were exercised while no rights were either forfeited or cancelled. Compensation expense recognized by the Company in connection with such awards totaled approximately $8,000 and $76,000 in 1998 and 1997, respectively. However, in 1996, $94,000 of prior expense was recovered due to a decline in the market price of the units. No unit appreciation rights have been issued in connection with the Director's Incentive Plan.
As of December 31, 1998, the dates that the 39,360 outstanding Unit Appreciation Rights become exercisable and their expiration dates are as follows:
Rights Expiring --------------------------------------------- May 15, October 18, June 19, August 13, Rights Exercisable at: 2004 2004 2007 2007 - --------------------- ------- ----------- -------- ----------
December 31, 1998 12,928 200 2,600 2,000 May 15, 1999 3,232 June 19, 1999 2,600 August 13, 1999 2,000 June 19, 2000 2,600 August 13, 2000 2,000 June 19, 2001 2,600 August 13, 2001 2,000 June 19, 2002 2,600 August 13, 2002 2,000 ------ ------ ------ ------ 16,160 200 13,000 10,000 ====== ====== ====== ====== Warrants
In 1993, warrants to purchase 20,000 IGC units were issued to an investment banking firm in connection with a "highly confident letter" relating to proposed Virginia race track financing. The warrants had an exercise price of $5.30 per warrant and expire on September 30, 2003. The warrant agreement requires, in the event of a distribution of units, the number of warrants would be adjusted so the warrant holder would receive units in the distributed entity. Therefore, the warrant holder upon exercise of the warrants would be entitled to shares of ACPT. At the time of exercise, IGC would be required to purchase the ACPT shares on the open market at the existing trading price. As there is no way to estimate whether the warrants would be exercised or when, no adjustments have been made to the accompanying financial statements for the contingency related to the purchase of the shares.
Warrants to purchase 150,000 Class A Units of IGC were issued to Banc One in 1997 as additional consideration for making their loan to the Company in August 1997. Due to the Distribution, these warrants have been
replaced with warrants to purchase ACPT shares.
(8) RETIREMENT AND PROFIT SHARING PLANS
IGC established a retirement plan (the "Retirement Plan") effective January 1, 1988 for non-union employees of IGC. In 1992, the union employees were added to the plan. Employees are eligible to participate in the Retirement Plan when they have completed a minimum employment period of generally one year. IGC's contributions to the Retirement Plan and U.S. Social Security Plan for eligible employees were equal to 11.65% of basic salaries and wages for 1998, 1997 and 1996 that were not in excess of the U.S. Social Security taxable wage base, plus 8% of salaries which exceeded the U.S. Social Security taxable wage base. Employees' salaries in excess of $150,000 for 1998, 1997 and 1996 were excluded from the calculation of contributions. Payments are also made to the Retirement Plan from IGC contributions to a profit sharing plan, as described below, and from voluntary contributions by employees. Contributions to the Retirement Plan were $208,000, $467,000 and $407,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
In 1987, IGC established an incentive compensation plan (the "Profit Sharing Plan") based on net income of the Company. No contributions were made for 1998, 1997 or 1996.
(9) INCOME TAXES
As a U.S. Company doing business in Puerto Rico, IGC was subject to Puerto Rico income tax on its Puerto Rico source income. The taxes reflected below are a result of that liability.
In conjunction with the Distribution the liability to pay income taxes by IGC for liabilities incurred prior to the Distribution date were assumed by ACPT. Accordingly the Company recorded a provision for income taxes through the Distribution date for all taxable income prior to October 5, 1998 and has recorded a receivable from ACPT to reflect the obligation of ACPT to pay those taxes.
The Company is not subject to U.S. taxes as a partnership. Therefore, the calculation below for the provision for income taxes does not include the income from U.S. operations which is not subject to income taxes. It does include the Puerto Rico source income which is subject to income taxes in Puerto Rico at the statutory rate of 29%. The Company did not reflect a tax provision in the fourth quarter as it had no Puerto Rico source income. The following table reconciles the effective rate solely attributable to Puerto Rico source income:
December 31, ------------------------------------------------- 1998 1997 1996 --------------- -------------- -------------- (In thousands, except amounts in %)
% of % of % of Amount Income Amount Income Amount Income ------ ------ ------ ------ ------ ------ Provision for income taxes at the statutory income tax rate $ 740 29% $ 606 29% $3,634 29% ------ ---- ------ --- ----- --- $ 740 29% $606 29% $3,634 29% ====== ==== ====== === ====== ===
The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ------------ ----------- ----------- (In thousands) Currently payable United States $ -- $ -- $ -- Puerto Rico 918 1,453 3,005 Deferred (178) (847) 629 ------ ------ ------ $ 740 $606 $3,634 (a) ====== ====== ======
(a) Pursuant to IGC's partnership agreement, a portion of the gain and the related tax from the sale of four apartment projects was specifically allocated to the general partner. The Company has recorded tax owed by the general partner as a reduction of the provision for income taxes.
Deferred income taxes reflect the "temporary differences" between amounts of assets and liabilities for financial reporting purposes as determined in accordance with SFAS No. 109 and such amounts as measured by tax laws.
Deferred taxes payable for 1998 were eliminated in the Distribution to ACPT.
The components of deferred taxes payable for 1997 include the following:
AT DECEMBER 31, ----------------- ----------- (In thousands) Tax on amortization of deferred income related to long-term receivables from partnerships operating in Puerto Rico $ 556 Tax on equity in earnings of partnerships operating in Puerto Rico 1,232 Tax on land development costs capitalized for book purposes but deducted currently for tax purposes 2,465 Tax on interest income, payable when collected 367 Tax on sale to related party deferred for book purposes but currently taxable (133) ------ $4,487 ======
The reconciliation between net (loss) income per books and net taxable income (loss) is as follows: December 31, ------------------------------------------------- 1998 1997 1996 --------------- -------------- -------------- (In thousands, except per Unit amounts)
Per Per Per Total Unit Total Unit Total Unit ------ ------ ------ ---- ----- ------ Net (loss) income per books $ 518 $ .25 $ (3,585) (1.74) $ 9,845 $ 4.80 Built-in gain allocable to Predecessors: Current (3,761) (1.83) (464) (.25) (3,554) (1.75) Deferred (359) (.17) (529) (.25) (415) (.20) Difference in income or losses from subsidiary partnerships (1,650) (.80) (430) (.20) (4,968) (2.40) Differences in treatment of corporate subsidiaries (3,912) (1.90) 18 -- 269 .15 Capitalization of general and administrative expenses under the Uniform Capitalization Rules 247 .12 49 -- (246) (.10) Differences in deferred income (87) (.04) 175 .10 (1,431) (.70) Difference in cost of sales due to interest related to the acquisition of land, deducted for tax purposes 399 .19 390 .20 513 .25 Deferred income taxes (178) (.09) (847) (.40) 629 .30 Losses from restructuring (211) (.10) (225) (.10) (3,742) (1.80) Differences in wetland litigation costs (529) (.26) 860 .40 (1,323) (.65) Gain on contribution of assets and liabilities to corporations (spin-off) 3,000 1.46 -- -- -- -- Other book to tax reconciling items, none of which is individually significant 787 .38 4,918 2.40 3,783 1.85 ------ ---- ------- ------ ------- ----- Net taxable income (loss) per partnership federal return $(5,736)$(2.79) $ 330 $ .16 $ (640)$ (.25) ====== ==== ======= ====== ======= ======
IGC had been grandfathered through 1997 as a non-tax paying public partnership. Such grandfathering was based on guidelines outlined in the Omnibus Budget Reconciliation Act of 1987 allowing publicly traded partnerships existing as of December 17, 1987 not to be taxed as corporations as long as a substantial new line of business is not added. However, beginning in 1998, IGC could be taxed as a corporation unless at least 90% of IGC's gross income is derived from qualifying "passive type" sources such as interest, dividends and real property income. IGC was in compliance with these requirements at December 31, 1998.
As of December 31, 1998, IGC continues to qualify as a non-tax paying public partnership. IGC will be taxed as a corporation unless at least 90% of IGC's gross income is derived from qualifying "passive type" sources such as interest, dividends and real property income. Due to the restructure IGC plans to continue complying with the 90% test in the forseeable future. As discussed above, if IGC is not in compliance with the 90% test in any given taxable year, it will be taxed as a corporation at statuatory corporate rates and those taxes could be substantial.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The balance sheet carrying amounts of cash and cash equivalents, receivables and other current assets approximate fair value due to the short-term nature of these items. Fair value of long-term debt instruments was determined by discounting future cash flows using IGC's current market rates. As of December 31, 1998 and 1997, the fair value of long-term debt instruments were $4,093,000 and $74,253,000, respectively.
(11) QUARTERLY SUMMARY (UNAUDITED)
IGC's quarterly results are summarized as follows:
Year Ended December 31, 1998 ---------------------------------------------- 1st 2nd 3rd 4th Total for Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- --------- (In thousands, except per Unit amounts)
Revenues $ 11,958 $11,563 $ 7,057 $ 2,370 $32,948 Income (loss) before taxes and minority interest 1,580 1,924 (293) (1,507) 1,704 Net income (loss) 1,047 1,492 (514) (1,507) 518
Basic net income per Unit .50 .72 (.25) (.72) .25
Year Ended December 31, 1997 ---------------------------------------------- 1st 2nd 3rd 4th Total for Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- --------- (In thousands, except per Unit amounts)
Revenues $ 7,387 $10,809 $ 7,174 $10,842 $36,212 Income (loss) before extraordinary item, taxes and minority interest 415 1,763 (246) (4,472) (2,540) Net income (loss) as previously reported 255 1,798 (808) (4,830) (3,585) Adjustment for Coachman's Landing (1) -- (576) -- 576 -- Adjustment for spin-off costs (2) -- -- (300) 300 -- Net income (loss) as revised 255 1,222 (1,108) (3,954) (3,585) Basic earnings per Unit as previously reported: Net income (loss) .12 .87 (.39) (2.34) (1.74) Basic earnings per Unit as revised: Net income (loss) .12 .60 (.54) (1.92) (1.74)
(1) Adjustment made in the fourth quarter for Coachman's Landing is to reverse gain recorded on sale of a portion of IGC's investment in Coachman's Landing.
(2) Adjustment made in the fourth quarter for spin-off costs is to expense spin-off costs which were capitalized as start-up costs during the quarter.
(12) SEGMENT INFORMATION
IGC has four reportable segments: AFH, IWT/CWT, U.S. land and other, and Puerto Rico. U.S. land and other operations include investment in rental properties, community development, and management services. The Puerto Rico operations include investment in rental properties, investment in commercial properties, community development, management services, and homebuilding through a joint venture.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following present the segment information for the years ended December 31, 1998, 1997 and 1996 (in thousands):
INTERSTATE GENERAL COMPANY L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (In thousands)
Bldgs. & Improve- Subsequent Description Encumbrances Land ments Costs - -------------------- ------------ -------- ----------- ----------
Palmer Apartments 4,116 471 4,788 499 Garden Apartments St. Charles, MD
Brookmont Apartments 2,262 162 2,677 342 Garden Apartments St. Charles, MD
Headen Apartments 4,780 205 4,765 1,103 Garden Apartments St. Charles, MD
Terrace Apartments 4,851 497 5,377 575 Garden Apartments St. Charles, MD
Coachman's Landing Apt. 5,806 572 6,421 24 Garden Apartments St. Charles, MD
Chastleton Apartments 16,287 2,630 23,624 1,059 High Rise Apartments Washington, D.C.
Office Condo 199 -- 284 -- East Whitiland Township Pennsylvania
Fredericksburg, VA 169 158 95 5 Model Park 1 Model
Raleigh, NC -- -- 75 6 2 Models ----------- ---------- ----------- --------- Total Properties $ 38,470 $ 4,695 $ 48,106 $ 3,613 =========== ========== =========== =========
INTERSTATE GENERAL COMPANY L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (In thousands)
Bldgs. & Accumulated Description Land Improvements Total Depreciation - -------------------- ---- ------------ ----- ------------
Palmer Apartments 471 5,287 5,758 4,242 Garden Apartments St. Charles, MD
Brookmont Apartments 162 3,019 3,181 2,404 Garden Apartments St. Charles, MD
Headen Apartments 205 5,868 6,073 4,222 Garden Apartments St. Charles, MD
Terrace Apartments 497 5,952 6,449 4,738 Garden Apartments St. Charles, MD
Coachman's Landing Apt. 572 6,445 7,017 1,565 Garden Apartments St. Charles, MD
Chastleton Apartments 2,630 24,683 27,313 7,419 High Rise Apartments Washington, D.C.
Office Condo -- 284 284 77 East Whitiland Township Pennsylvania
Fredericksburg, VA 158 100 258 26 Model Park 1 Model
Raleigh, NC -- 81 81 24 2 Models ---------- ----------- ----------- ---------- Total Properties $ 4,695 $ 51,719 $ 56,414 $ 24,717 ========== =========== =========== ==========
NOTE TO TOTAL CAPITALIZED COSTS:
THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES FOR U.S. AND P.R. PROPERTIES IS $ 51,626
INTERSTATE GENERAL COMPANY L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES
Date Constructed Description or Acquired Depreciable Life - -------------------- ----------- ------------------
Palmer Apartments 3/31/80 Bldg - 40 Yrs Garden Apartments Constructed Bldg Equip - 5/7 Yrs St. Charles, MD
Brookmont Apartments 5/18/79 Bldg - 40 Yrs Garden Apartments Constructed Bldg Equip - 5/7 Yrs St. Charles, MD
Headen Apartments 10/30/80 Bldg - 40 Yrs Garden Apartments Constructed Bldg Equip - 5/7 Yrs St. Charles, MD
Terrace Apartments 11/1/79 Bldg - 40 Yrs Garden Apartments Constructed Bldg Equip - 5/7 Yrs St. Charles, MD
Coachman's Landing Apt. 9/5/89 Bldg - 40 Yrs Garden Apartments Constructed Bldg Equip - 5/7 Yrs St. Charles, MD
Chastleton Apartments 11/7/86 Bldg - 40 Yrs High Rise Apartments Constructed Bldg Equip - 5/10 Yrs Washington, D.C.
Office Condo 5/14/90 31.5 Yrs East Whitiland Township Acquired Pennsylvania
Fredericksburg, VA 2/23/90 Bldg 5 - 40 Yrs Model Park 1 Model Acquired
Raleigh, NC 2/23/90 Bldg 5 - 40 Yrs Model Park 2 Models Acquired
INTERSTATE GENERAL COMPANY L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998 (In thousands)
Real Estate at December 31, 1996 $ 246,552
Additions for 1997: Improvements 1,919 -----------
Deductions for 1997: Dispositions 2,051 -----------
Real Estate at December 31, 1997 $ 246,420 ===========
Additions for 1998: Improvements 556 -----------
Deductions for 1998: Distribution to ACPT 190,562 -----------
Real Estate at December 31, 1998 $ 56,414 ===========
INTERSTATE GENERAL COMPANY L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998 (In thousands)
Accumulated depreciation at December 31, 1996 $ 100,422
Additions for 1997: Depreciation expense 6,408 -----------
Deductions for 1997: Dispositions 1,944 -----------
Accumulated depreciation at December 31, 1997 $ 104,886 ===========
Additions for 1998: Depreciation expense 1,460 -----------
Deductions for 1998: Distribution to ACPT 81,629 -----------
Accumulated depreciation at December 31, 1998 $ 24,717 ===========
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of IGC's managing general partner, Interstate General Management Corporation ("IGMC"), is as follows:
Name Age Office
James J. Wilson 65 Chairman, Director and Chief Executive Officer
Mark Augenblick 52 Director
Donald G. Blakeman 66 Director
Thomas J. Shafer 69 Director
The following are the executive officers of IGC:
Name Age Office
James J. Wilson 65 Chairman and Chief Executive Officer
Mark Augenblick 52 Vice Chairman and President
Benjamin L. Poole 38 Vice-President and Chief Financial Officer
Francis C. Campbell 58 President, IWT and CWT (wholly owned subsidiaries of IGC)
Larry F. Liddle 55 Vice-President, IWT and CWT (wholly owned subsidiaries of IGC) Term of Office. Directors of IGMC are elected annually in April by action of the directors then holding office. Under the IGC Partnership Agreement, IBC has the right to designate one-third of the directors of IGMC as long as IBC continues as a General Partner of IGC. As practicable, an additional one-third are to be persons who are neither affiliates of IGC nor existing officers or employees of IGC, any General Partner or any of their affiliates. The remaining directors are to be persons who are officers of IGC. Messrs. Blakeman and Shafer currently serve as the unaffiliated directors. Messr. James J. Wilson serves as the IBC director designate.
James J. Wilson has been Chairman of the Board of IGMC since its inception in 1986. He also served as its President from 1986-1996. He is the founder of IGC and has been Chief Executive Officer of IGC and its predecessors since its inception in 1957, and was President from 1957-1994. He was named IGC Chairman in 1994. He is the founder of IBC and its predecessors, and has served as IBC's Chairman of the Board and Chief Executive Officer since 1957 and as President from 1957-1994.
Mark Augenblick became a Director of IGMC and Vice Chairman of the Company in March 1998. Prior to joining the Company, Mr. Augenblick was a partner in the Washington, D.C. law firm, Shaw, Pittman, Potts & Trowbridge.
Donald G. Blakeman has been a Director of IGMC since its inception in 1986. He served as Executive Vice President of IGMC and IGC from 1986-1996 and Secretary of IGMC from 1990-1995. He served in various executive positions with IGC and its predecessor companies from 1968-1996. He served as President of Equus and Equus Management Company ("EMC") from February 1996 until his retirement in 1997. He has served as a Director of EMC since its formation in 1994.
Thomas J. Shafer was appointed a Director of IGMC in January 1998. He is a registered Professional Engineer specializing in real estate evaluation and land development. Until his retirement in December 1997, he was a partner of Whitman, Requardt and Associates, LLP, an engineering and architectural firm, since 1976 and its managing partner since 1989. Mr. Shafer serves on the Business Advisory Committee of Mayor Kurt Schmoke of Baltimore and as the President and Chairman of the Board of the Charles Village Community Benefits District and the Charles Village Community Foundation, Inc. Mr. Shafer is a member of the Urban Land Institute, the National Society of Professional Engineers and the American Water Works Association. His firm has provided engineering services to IGC in connection with the St. Charles development for thirty years.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table. The following information is furnished with respect to the Chief Executive Officer and each of the other three most highly compensated Executive Officers of the Company (collectively, the "Executive Officers").
Long-Term Compensation ------------ Annual Compensation Awards --------------------------------- ------------ Securities Other Underlying Annual Options/ All Other Name & Principal Year Salary Bonus Compensation SAR's Compensation Position ($) ($) ($) (2) # ($) (1) ---------------- ---- ------- ------ ------------ ---------- ------------
James J. Wilson (3) Chairman & Chief 1998 500,200 -- -- -- 10,064 Executive Officer 1997 498,391 -- -- -- 10,184 1996 499,075 -- -- -- 9,492
Mark Augenblick Vice-Chairman & 1998 292,508 -- -- -- 0,000 President 1997 -- -- -- -- 0,000 1996 -- -- -- -- 0,000
Benjamin L. Poole (4) Vice Presidnet & 1998 5,256 -- -- -- 0,000 Chief Financial 1997 -- -- -- -- 0,000 Officer 1996 -- -- -- -- 0,000
Francis Campbell (4) President 1998 156,450 -- -- -- 9,764 IWT/CWT 1997 150,200 -- -- -- 9,384 1996 132,492 -- -- -- 8,075
Larry Liddle (4) Vice President 1998 102,700 -- -- -- 5,464 IWT/CWT 1997 103,013 -- -- -- 5,609 1996 86,700 -- -- -- 4,412
Edwin L. Kelly (5) President & Chief 1998 211,458 -- -- -- 10,064 Operatin Officer 1997 223,827 -- -- -- 10,184 1996 197,367 -- -- -- 9,492
Francisco Arrivi Cros (5) Senior Vice 1998 211,538 -- -- -- 10,064 President 1997 227,244 100,000 -- -- 9,420 1996 190,200 -- -- -- 9,492
(1) Reflects IGC's contributions to Retirement Plan discussed below. (2) Represents the difference between the price paid for shares of the Company's stock obtained by exercising stock options and the fair market value of the stock at the date of purchase.
(3) Mr. Wilson entered into a consulting agreement with American Rental Management Company (a subsidiary of ACPT) providing for an annual consulting fee of $500,000 per year for a two year period, then $200,000 per year for an eight year period. Mr. Wilson's consulting fee is paid directly to IGC who, in turn, pays Mr. Wilson. (4) With respect to the above referenced officers, Form 3's were not filed on a timely basis. (5) The above referenced individuals were employees of the Company through September 30, 1998.
Employment Agreements. Mr. Augenblick entered into a four year employment agreement with the Company commencing March 23, 1998. The agreement provides for a base salary of $400,000, annual directors' fees totalling $50,000, shares in Interstate Waste Technologies and Caribe Waste Technologies, a financing bonus and completion bonus based on the number and size of waste facilities developed, certain fringe benefits, death or disability benefits and severance pay for the unexpired term of the contract.
Mr. Poole entered into a three year employment agreement with the Company commencing December 7, 1998. The agreement provides for a base salary of $200,000, a one-time transition payment of $20,000, certain fringe benefits, death or disability benefits, and severance pay for the unexpired term of the contract.
Mr. Campbell entered into a one year employment agreement with the Company commencing October 1, 1998. The agreement provides for a base salary of $175,000, a financing bonus and completion bonus based on the number and size of waste facilities developed, certain fringe benefits, death or disability benefits, and severance pay for the unexpired term of the contract.
Mr. Liddle entered into a one year employment agreement with the Company commencing October 1, 1998. The agreement provides for a base salary of $110,000, a financing bonus and completion bonus based on the number and size of waste facilities developed, certain fringe benefits, death or disability benefits, and severance pay for the unexpired term of the contract.
Directors. Directors of the Managing General Partner that do not receive salaries from the Company or affiliates receive directors' fees established by the Board of Directors of the Managing General Partner. These directors are compensated at a rate of $5,000 per quarter, $1,400 per meeting and out of pocket travel reimbursements for meeting attendance. During 1998, the directors' fees totaled $42,067 of which $39,200 were unpaid as of December 31, 1998.
IBC indemnifies the directors of the Managing General Partner against any liability (including legal fees and expenses) arising out of their serving in such capacities, except for liabilities arising out of the gross negligence or willful misconduct of such directors.
Unit Options and Unit Appreciation Rights. IGC's employees (may include current employees of ACPT), including its directors and officers, are eligible to participate in the Unit Incentive Plan (the "Employees Plan"). Under the Employees Plan, a committee composed of the independent directors of IGMC (the "Committee") awards Unit options ("Options") or Unit Appreciation Rights ("Rights") to employees and officers on the basis of their performance. The Rights entitle the holder to receive upon exercise, an amount payable in cash, Class A units of the Company, other property or some combination thereof, as determined by the Committee. The amount received upon exercise is determined based on the excess of the fair market value of the Company's Units on the exercise date, (plus 50% of the fair market value of Equus Units on the exercise date for Rights granted prior to 1995), over the base price of the Right specified in the individual rights agreements. There were no unit appreciation rights granted during 1998.
Long-Term Incentive Plan. IGC has established an incentive compensation plan (the "Profit Sharing Plan") pursuant to which IGC awards annual cash bonuses to officers and employees in reasonable amounts reflecting their contributions to the Company. The persons to receive bonuses and the amounts of such bonuses are approved by the unaffiliated directors of IGMC. Under the Profit Sharing Plan, a portion of each bonus, keyed by the compensation committee to a percentage of the employees' salary, is contributed on behalf of the employee to the retirement plan discussed below. No contributions were made to the Profit Sharing Plan during 1998, 1997 or 1996.
Retirement Plan. IGC maintains a retirement plan (the "Retirement Plan") for eligible employees of the Company. Employees are generally eligible to participate when they complete one year of service. Contributions to the Retirement Plan in 1998, 1997 and 1996 were in amounts equal to 4% of base salaries and wages not in excess of the U.S. Social Security taxable wage base, and 8% of salaries (limited to $150,000) that exceeded that wage base. Additional contributions to the Retirement Plan are made pursuant to the Profit Sharing Plan.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN UNITHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the Units that were beneficially owned on March 1, 1998 (i) by each person who is known by the general partners to beneficially own more than 5% of the outstanding units of the Company, (ii) by named executive officers of a general partner, and (iii) by all executive officers of the Company and directors of the general partners as a group. Except where noted, the address for the beneficial owner is 222 Smallwood Village Center, St. Charles, Maryland, 20602.
Beneficial Ownership (1) ------------------------ Number of Name of Beneficial Owner IGC Units Percent - ------------------------ ------------- -------
James J. Wilson (2) 6,135 .3
Mark Augenblick -- --
Benjamin L. Poole -- --
Francis C. Campbell -- --
Larry Liddle -- --
Donald G. Blakeman -- --
All executive officers of IGC and directors of IGMC as a group 6,135 .3
Bessemer Interstate Corporation 245 Peachtree Center Avenue #804 Atlanta, GA 30303 104,442 5.08
Interstate Business Corporation 222 Smallwood Village Center St. Charles, MD 20602 616,103 29.97
Wilson Securities Corporation 222 Smallwood Village Center St. Charles, MD 20602 315,296 15.34
(1) The beneficial ownership of Units is determined on the basis of Units directly and indirectly owned by executive officers of IGC and directors of IGMC and Units to be issued to IGC officers under options which are exercisable within the next 60 days.
(2) Includes 100 IGC Units (0%) held by his wife, Barbara A. Wilson.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information responding to this item appears in Note 5 to the Company's Consolidated Financial Statements included in Item 8 of this report.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Interstate General Company L.P. are contained herein:
Report of Independent Public Accountants
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Changes in Partners' Capital for the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements for the years ended December 31, 1998, 1997 and 1996
2. Financial Statement Schedules
The following financial statements schedules are contained herein:
Schedule III -- Real Estate and Accumulated Depreciation
3. Exhibits
Exhibits required by Securities and Exchange Commission Section 601 of Regulation S-K.
Exhibit No. Description of Exhibit Reference - ------- ----------------------------------------- ------------------------
3(a) Third Amended and Restated Agreement of Exhibit 3(a) to Amendment Limited Partnership of Interstate General No. 3 to Registration Company L.P. Statement No. 33-10636 on Form S-1, filed February 11, 1987 (Form "S-1")
(b) First Amendment to Third Amended and Exhibit 3(b) to 1987 10-K Restated Agreement of Limited Partnership of Interstate General Company L.P.
(c) Second Amendment to Third Amended and Exhibit 3(c) to 1988 10-K Restated Agreement of Limited Partnership of Interstate General Company L.P.
(d) Amended and Restated Certificate of Exhibit 3(b) to Form S-1 Limited Partnership of Interstate General Company L.P.
(e) Certificate of Incorporation of Exhibit 3(c) to Form S-1 Interstate General Management Corporation
(f) Bylaws of Interstate General Management Exhibits 3(d) and 3(1) to Corporation, as amended Form S-1
(g) Certificate of Incorporation of Exhibit 3(g) to Form S-1 Interstate Business Corporation (formerly Interstate St. Charles, Inc.) as amended
(h) Bylaws of Interstate Business Corporation Exhibit 3(h) to Form S-1 (formerly Interstate St. Charles, Inc.) as amended February 4, 1986
(i) Amendment to Bylaws of Interstate Exhibit 3(i) to 1988 10-K General Management Corporation dated November 10, 1988
4(a) Form of beneficial assignment Exhibit 4(a) to Form S-1 certificate representing Units
(b) Form of certificate evidencing limited Exhibit 4(b) to Form S-1 partnership interest
(c) Certificate of Incorporation of Exhibit 4(c) to Form S-1 Interstate Management Title Company dated September 19, 1986
(d) Bylaws of Interstate Management Title Exhibit 4(d) to Form S-1 Company dated September 25, 1986
(e) Amendment to Certificate of Incorporation Exhibit 4(e) to Form S-1 of Interstate Management Title Company dated December 31, 1986
10. Material Contracts
(a) Employment Agreement with Exhibit 10(a) to Form 10-Q Edwin L. Kelly for the quarter ended June 30, 1994
(b) Amendment to Employment Agreement between Exhibit 10(a) to Form 10-Q Interstate General Company L.P. and for the quarter ended Edwin L. Kelly dated May 20, 1994 June 30, 1995
(c) Second Amendment to Employment Agreement Exhibit 10(b) to Form 10-Q between Interstate General Company L.P. for the quarter ended and Edwin L. Kelly dated May 20, 1994 June 30, 1996
(d) Third Amendment to Employment Agreement Exhibit 10(l) to 1996 10-K between Interstate General Company L.P. and Edwin L. Kelly dated May 20, 1994
(e) Employment Agreement between Interstate Exhibit 10(j) to 1995 10-K General Company L.P. and James J. Wilson dated January 15, 1996
(f) Employment Agreement between Interstate Exhibit 10(a) to Form 10-Q Waste Technologies, Inc. and Francis C. for the quarter ended Campbell dated September 1, 1996 September 30, 1996
(g) Employment Agreement between Interstate Exhibit 10(g) to 1997 10-K General Company L.P. and Mark Augenblick dated March 11, 1998
(h) Employment Agreement between Interstate Exhibit 10(h) to 1998 10-K General Company L.P. and Benjamin L. Poole dated December 7, 1999
(i) Employment Agreement between Interstate Exhibit 10(i) to 1998 10-K General Company L.P. and Larry F. Liddle dated October 1, 1998
(j) Employment Agreement between Interstate Exhibit 10(i) to 1998 10-K General Company L.P. and Francis Campbell dated October 1, 1998
(k) Indemnity Agreement among Interstate Exhibit 10(f) to Form S-1 General Business Corporation, Interstate St. Charles, Inc. and each director and officer of Interstate General Management Corporation
(l) Unit Incentive Plan for Directors, Exhibit 10(i) to 1994 10-K Amended and Restated, dated March 17, 1995
(m) Unit Incentive Plan for Employees, Exhibit 10(j) to 1994 10-K
Amended and Restated, dated March 17, 1995
(n) Amended and Restated Certificate and Exhibit 10(11) to Form S-1 Agreement of Limited Partnership of St. Charles Associates Limited Partnership dated March 14, 1985
(o) Amended and Restated Certificate and Exhibit 10(j) to Form S-1 Agreement of Limited Partnership of Interstate General Properties Limited Partnership dated December 31, 1986
(p) Second Amended and Restated Certificate Exhibit 10(kk) to Form S-1 and Agreement of Limited Partnership of Interstate General Properties Limited Partnership dated as of December 31, 1986
(q) Third Amendment to Second Amended and Exhibit 10(kk) to Restated Certificate and Agreement of 1989 10-K Interstate General Properties Limited Partnership dated February 16, 1990
(r) Fourth Amendment to Second Amendment Exhibit 10(lll) to and Restated Certificate and Agreement 1991 10-K of Interstate General Properties Limited Partnership S.P., dated June 29, 1981
(s) Fifth Amendment to Second Amendment and Exhibit 10(mmm) to Restated Certificate and Agreement of 1991 10-K Interstate General Properties Limited Partnership S.P., dated June 29, 1981
(t) Sixth Amendment to Second Amended and Exhibit 10(a) to Form 10-Q Restated Certificate and Agreement of for the quarter ended Limited Partnership of Interstate March 31, 1998 General Properties Limited Partnership S.E. dated as of April 1, 1998
(u) Partnership agreement for Fox Chase Exhibit 10(p) to Form S-1 Apartments General Partnership as amended January 29, 1986
(v) Amendment to Partnership Agreement for Exhibit 10(mm) to Form S-1 Fox Chase Apartments General Partnership dated February 10, 1987
(w) Withdrawal, Mutual Release and Exhibit 10(q) to 1993 10-K Indemnification Agreement and Amendment to Fox Chase General Partnership Agreement dated August 20, 1993
(x) Partnership agreement for Wakefield Third Exhibit 10(r) to Form S-1 Age Associates Limited Partnership dated July 1, 1985
(y) Partnership agreement for Wakefield Exhibit 10(t) to Form S-1 Terrace Associates Limited Partnership
dated July 1, 1985
(z) Partnership agreement for Headen House Exhibit 10(v) to Form S-1 Associates Limited Partnership dated July 1, 1985
(aa) Partnership agreement for Palmer Exhibit 10(w) to Form S-1 Apartments Associates Limited Partnership dated July 1, 1985
(bb) Partnership agreement for Chastleton Exhibit 10(dd) to Form S-1 Apartments Associates dated May 1, 1986
(cc) Partnership agreement for New Forest Exhibit 10(ff) to Form S-1 Apartments General Partnership dated November 18, 1986
(dd) First Amendment to the General Exhibit 10(ii) to Partnership Agreement of New Forest 1988 10-K Apartments General Partnership dated February 24, 1987
(ee) Second Amendment to the General Exhibit 10(hh) to Partnership Agreement of New Forest 1988 10-K Apartments General Partnership dated December 19, 1988
(ff) Withdrawal, Mutual Release and Exhibit 10(z) to 1993 10-K Indemnification Agreement and Amendment to New Forest Apartments General Partnership Agreement dated August 20, 1993
(gg) Limited Partnership Agreement and Exhibit 10(zz) to Amended and Restated Limited Partnership 1988 10-K Certificate of Coachman's Limited Partnership dated June 2, 1988
(hh) Management Services Agreements between Exhibit 10(k) to Form S-1 Interstate General Properties Limited Partnership and National General Corporation (3 separate agreements)
(ii) Property Management Agreement between Exhibit 10(oo) to Form S-1 National General Corporation and Interstate General Corporation and Interstate General Properties Limited Partnership as amended March 30, 1986
(jj) Management service agreement between Exhibit 10(jj) to Interstate General Company L.P. and 1989 10-K Coachman's Limited Partnership dated May 2, 1988
(kk) Amendment to Management Service Exhibit 10(hh) to Agreement between Interstate General 1993 10-K Company L.P. and Coachman's Limited
Partnership dated January 1, 1993
(ll) Management Agreement by and between Exhibit 10(zzzz) to Interstate Properties and Interstate 1992 10-K St. Charles, Inc. (El Monte), dated January 5, 1987
(mm) First Amendment to Management Agreement Exhibit 10(aaaaa) to by and between Interstate Properties and 1992 10-K Interstate Business Corporation (El Monte), dated January 4, 1988
(nn) Second Amendment to Management Agreement Exhibit 10(bbbbb) to by and between Interstate Properties and 1992 10-K Interstate Business Corporation (El Monte), dated December 31, 1992
(oo) Management Agreement by and between Exhibit 10(ccccc) to Interstate General Properties and 1992 10-K Interstate St. Charles, Inc. (Santa Maria Shopping Center), dated January 5, 1987
(pp) First Amendment to Management Agreement Exhibit 10(ddddd) to by and between Interstate General 1992 10-K Properties Limited Partnership and Interstate Business Corporation (Santa Maria Shopping Center), dated January 4, 1988
(qq) Second Amendment to Management Agreement Exhibit 10(eeeee) to by and between Interstate General 1992 10-K Properties Limited Partnership S.E. and Interstate Business Corporation and Santa Maria Associates S.E., dated December 28, 1990
(rr) Two (2) Property management agreements Exhibit 10(aa) to Form S-1 between Interstate General Properties Limited Partnership and Capitol Park Associates as amended December 31, 1984
(ss) Lease for office space between Interstate Exhibit 10(r) to Form S-1 General Business Corporation and Smallwood Village Associates Limited Partnership dated May 21, 1981
(tt) Lease for office space between Interstate Exhibit 10(m) to Form S-1 General Business Corporation and Smallwood Village Associates Limited Partnership dated June 15, 1981
(uu) Lease Amendment to Lease for commercial Exhibit 10(c) to Form 10-Q space between Smallwood Village Associates for the quarter ended and Interstate General Company L.P. September 30, 1995 dated October 1, 1991
(vv) Lease Amendment II to Lease for commercial Exhibit 10(d) to Form 10-Q space between Smallwood Village Associates for the quarter ended and Interstate General Company L.P. September 30, 1995
dated September 5, 1995
(ww) Store Lease between Interstate General Exhibit 10(fff) to Business Corporation and Smallwood 1991 10-K Village Associates Limited Partnership dated April 1, 1988
(xx) Store Lease between Smallwood Village Exhibit 10(e) to Form 10-Q Associates and Interstate General for the quarter ended Company L.P. dated December 1, 1987 September 30, 1995
(yy) Lease Amendment to Store Lease between Exhibit 10(f) to Form 10-Q Smallwood Village Associates and for the quarter ended Interstate General Company L.P. dated September 30, 1995 February 1, 1989
(zz) Lease Amendment II to Store Lease Exhibit 10(g) to Form 10-Q between Smallwood Village Associates for the quarter ended and Interstate General Company L.P. September 30, 1995 dated December 1, 1992
(aaa) Lease Amendment III to Store Lease Exhibit 10(h) to Form 10-Q between Smallwood Village Associates for the quarter ended and Interstate General Company L.P. September 30, 1995 dated September 30, 1994
(bbb) Lease Amendment IV to Store Lease Exhibit 10(i) to Form 10-Q between Smallwood Village Associates for the quarter ended and Interstate General Company L.P. September 30, 1995 dated September 5, 1995
(ccc) Office Lease between Smallwood Village Exhibit 10(a) to Form 10-Q Associates and Interstate General Company for the quarter ended L.P. for Smallwood Village Center dated September 30, 1995 August 25, 1995
(ddd) Amendment to Office Lease between Exhibit 10(b) to Form 10-Q Smallwood Village Associates and for the quarter ended Interstate General Company L.P. for September 30, 1995 Smallwood Village Center dated September 5, 1995
(eee) Fourth Amendment to Interstate General Exhibit 10(yyyy) to Company L.P. Retirement Plan, dated 1992 10-K July 1, 1992
(fff) Fifth Amendment to Interstate General Exhibit 10(b) to Form 10-Q Company L.P. Retirement Plan dated for the quarter ended June 5, 1995 June 30, 1995
(ggg) Agreement Regarding Partnership Interest Exhibit 10(nn) to Form S-1 in Chastleton Apartment Associates dated January, 1987
(hhh) Stockholders Agreement among Interstate Exhibit 10(pp) to Form S-1 and certain stockholders of Interstate St. Charles, Inc. dated as of December 1, 1986
(iii) License Agreement between Interstate Exhibit 10(qq) to Form S-1 General Company L.P., Interstate General Business Corporation and Interstate St. Charles, Inc., dated as of December 31, 1986
(jjj) Amendment to License Agreement between Exhibit 10(rr) to Form S-1 Interstate General Company L.P., Interstate General Business Corporation and Interstate General Company L.P., dated as of February 9, 1987
(kkk) Unitholders Agreement among Interstate Exhibit 10(ss) to Form S-1 General Business Corporation, Interstate St. Charles, Inc., and Interstate Properties Trust dated as of February 9, 1987
(lll) Agreement dated March 15, 1990 among Exhibit 10(ddd) to Interstate General Company L.P., 1990 10-K Interstate Business Corporation and Interstate General Properties
(mmm) Management service agreement between Exhibit 10(ee) to Form S-1 Interstate General Business Corporation Amendment Exhibit 10(ee) and Chastleton Apartments Associates to 1989 10-K as amended February 26, 1987
(nnn) Amendment to February 26, 1987 Exhibit 10(bbb) to Management Service Agreement between 1993 10-K Interstate General Business Corporation and Chastleton Apartment Associates dated January 1, 1993
(ooo) Property management agreement between Exhibit 10(z) to Form S-1 Interstate General Properties Limited Amendment Exhibit 10(z) to Partnership and G.L. Limited Partnership 1989 10-K as amended September 30, 1985 and as amended March 1, 1989
(ppp) Amendment to Property Management Exhibit 10(ddd) to Agreement between Interstate General 1993 10-K Properties Limited Partnership and G. L. Limited Partnership dated January 1, 1993
(qqq) Warrant Agreement between HDA Management Exhibit 10.3 to the S-4 Corporation, Housing Development Associates S.E. and Banco Popular De Puerto Rico as Warrant Agent dated December 15, 1993
(rrr) Limited Partnership Agreement of Equus Exhibit 10(d) to Form 10-Q Gaming Company L.P. dated August 1, 1994 for the quarter ended June 30, 1994
(sss) First Amendment to the Limited Exhibit 10(e) to Form 10-Q Partnership Agreement of Equus Gaming for the quarter ended Company L.P. dated August 1, 1994 June 30, 1994
(ttt) Second Amendment to the Limited Exhibit 10(f) to Form 10-Q Partnership Agreement of Equus Gaming for the quarter ended Company L.P. dated August 1, 1994 June 30, 1994
(uuu) Third Amendment to the Limited Exhibit 3.4 to Partnership Agreement of Equus Gaming to Registration Statement Company L.P. on Form S-11 of Equus Gaming Company L.P. Registration # 33-82750 (the "Equus S-11")
(vvv) Registration Rights Agreement with Exhibit 10.4 to the S-4 respect to the Warrants dated December 15, 1993, among HDAMC, HDA, Oppenheimer & Co., Inc. and The Argosy Securities Group L.P.
(www) Amended and Restated Management Exhibit 10.6 to the S-4 Agreement dated December 15, 1993, between Interstate General Properties Limited Partnership S.E. ("IGP") and HDA
(xxx) Master Support and Services Agreement Exhibit 10.20 to the dated December 9, 1994, between IGC Equus S-11 and Equus Gaming Company L.P.
(yyy) Consulting Agreement dated December 15, Exhibit 10.21 to the 1993, between El Comandante Operating Equus S-11 Company and Interstate General Properties Limited Partnership
(zzz) Amended and Restated Registration Rights Exhibit 10.29 to the Agreement with Respect to the Warrants Equus S-11 dated December 12, 1994, among HDAMC, HDA, Oppenheimer & Co., Inc., the Argosy Securities Group L.P. and Equus Gaming Company L.P.
(aaaa) Agreement of Purchase and Sale between Exhibit 10(dddd) to Interstate General Company L.P. and 1994 10-K Interstate Business Corporation dated December 30, 1994 for the Partnership Interests in: New Forest Apartments General Partnership Headen House Associates Limited Partnership Fox Chase Apartments General Partnership Palmer Apartments Associates Wakefield Terrace Associates Wakefield Third Age Associates
(bbbb) Agreement of Purchase and Sale between Exhibit 10(a) to Form 10-Q Interstate Business Corporation and for the quarter ended Interstate General Company L.P. dated June 30, 1996 June 12, 1996 for the Partnership
Interests in: Wakefield Terrace Associates Wakefield Third Age Associates Palmer Apartments Associates Headen House Associates Limited Partnership
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, there-unto duly authorized.
INTERSTATE GENERAL COMPANY L.P.
By: Interstate General Management Corporation Managing General Partner
Dated: April 1, 1999 By: /s/ James J. Wilson --------------------- ----------------------------- James J. Wilson Chairman and Chief Executive Officer
Dated: April 1, 1999 By: /s/ Mark Augenglick --------------------- ----------------------------- Mark Augenblick Vice Chairman, President and Director
Dated: April 1, 1999 By: /s/ Benjamin L. Poole --------------------- ----------------------------- Benjamin L. Poole Vice President and Chief Financial Officer
Dated: April 1, 1999 By: /s/ Paula S. Biggs --------------------- ----------------------------- Paula S. Biggs Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ------------------------- ------
/s/ James J. Wilson April 1, 1999 - ------------------------- Chairman, Chief Executive --------------- James J. Wilson Officer and Director
/s/ Mark Augenblick April 1, 1999 - ------------------------- President, Vice Chairman --------------- Mark Augenblick and Director
/s/ Benjamin L. Poole April 1, 1999 - ------------------------- Vice President and Chief --------------- Benjamin L. Poole Financial Officer
/s/ Paula S. Biggs April 1, 1999 - ------------------------- Treasurer --------------- Paula S. Biggs
Signature Title Date --------- ------------------------- ------
/s/ Donald G. Blakeman April 1, 1999 - ---------------------- Director --------------- Donald G. Blakeman
/s/ Thomas J. Shafer April 1, 1999 - ---------------------- Director --------------- Thomas J. Shafer
INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT - ------- -------
10. Material contracts
(h) Employment Agreement between Interstate General Company L.P. and Benjamin L. Poole dated December 7, 1998.
(i) Employment Agreement between Interstate General Company L.P. and Larry F. Liddle dated October 1, 1998.
(j) Employment Agreement between Interstate General Company L.P. and Francis Campbell dated October 1, 1998.
21. List of Subsidiaries of Interstate General Company L.P.
27. Financial Data Schedule