SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-16860
EAGLE INSURED L.P.
-------------------------------------------------------
(Exact names of registrant as specified in its charter)
Delaware 13-3442945
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[_]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS
September 30, December 31,
1996 1995
----------- -----------
Investments in mortgage loans $27,662,905 $27,764,817
Loan receivable from affiliate 3,060,000 3,060,000
Deferred loan origination fees, net 939,824 962,387
Cash and cash equivalents 1,228,628 1,145,895
Interest receivable 259,534 206,763
Equity loan to developer 0 6,162
Other assets 10,813 3,253
----------- -----------
Total assets $33,161,704 $33,149,277
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 62,992 $ 76,429
Accrued expenses 70,165 57,222
Distribution payable 39,214 0
----------- -----------
Total liabilities 172,371 133,651
----------- -----------
Contingencies
Partners' capital (deficit):
BUC$holders (2,641,100 BUC$
issued and outstanding) 33,325,980 33,351,747
General partners (336,647) (336,121)
----------- -----------
Total partners' capital 32,989,333 33,015,626
----------- -----------
Total liabilities and partners' capital $33,161,704 $33,149,277
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 614,314 $ 618,008 $ 1,920,967 $ 1,920,834
Loan receivable from affiliate 72,335 76,245 216,091 228,777
Temporary investments 11,963 13,804 33,047 40,390
Equity gain (loss) (62,501) (3,072) (6,162) 42,264
----------- ----------- ----------- -----------
Total revenues 636,111 704,985 2,163,943 2,232,265
----------- ----------- ----------- -----------
Expenses:
General and administrative 35,998 47,512 129,816 149,431
Amortization of deferred loan
origination fees 7,521 7,521 22,563 22,563
----------- ----------- ----------- -----------
Total expenses 43,519 55,033 155,521 171,994
----------- ----------- ----------- -----------
Net income $ 592,592 $ 649,952 $ 2,011,564 $ 2,060,271
=========== =========== =========== ===========
Allocation of Net Income:
BUC$holders $ 542,310 $ 598,523 $ 1,856,043 $ 1,903,775
=========== =========== =========== ===========
General partners:
Special distribution $ 39,214 $ 39,214 $ 117,642 $ 117,643
Other 11,068 12,215 37,879 38,853
----------- ----------- ----------- -----------
$ 50,282 $ 51,429 $ 155,521 $ 156,496
=========== =========== =========== ===========
Net income per BUC $ .20 $ .23 $ .70 $ .72
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Total BUC$holders General Partners
----- ----------- ----------------
<S> <C> <C> <C>
Partners' capital (deficit) - January 1, 1996 $33,015,626 $33,351,747 $(336,121)
Net income 2,011,564 1,856,043 155,521
Distributions (2,037,857) (1,881,810) (156,047)
----------- ----------- ---------
Partners' capital (deficit) - September 30, 1996 $32,989,333 $33,325,980 $(336,647)
=========== =========== =========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Interest received $2,117,334 $2,168,068
General and administrative expenses paid (137,870) (110,805)
---------- ----------
Net cash provided by operating activities 1,979,464 2,057,263
---------- ----------
Cash flows from investing activities:
Principal payments received on mortgage loans 101,912 96,151
---------- ----------
Cash flows from financing activities:
Distributions paid to partners (1,998,643) (1,998,307)
---------- ----------
Net increase in cash and cash equivalents 82,733 155,107
Cash and cash equivalents at beginning of the period 1,145,895 975,682
---------- ----------
Cash and cash equivalents at end of the period $1,228,628 $1,130,789
========== ==========
Reconciliation of net income to net cash provided by
operating activities:
Net income $2,011,564 $2,060,271
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity (gain) loss 6,162 (42,264)
Amortization of deferred loan origination fees 22,563 22,563
Changes in:
Interest receivable (52,771) (18,436)
Other assets (7,560) (6,469)
Due to affiliates (13,437) 27,690
Accrued expenses 12,943 13,908
---------- ----------
Total adjustments (32,100) (3,008)
---------- ----------
Net cash provided by operating activities $1,979,464 $2,057,263
========== ==========
Reconciliation of distributions paid to partners
Distributions to partners $2,037,857 $2,037,521
Increase in distribution payable (39,214) (39,214)
---------- ----------
Distributions paid to partners $1,998,643 $1,998,307
========== ==========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Eagle Insured L.P. (the "Partnership") as of September
30, 1996, the results of operations for the three and nine months ended
September 30, 1996 and 1995 and cash flows for the nine months ended September
30, 1996 and 1995. However, the operating results for the interim periods may
not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1995.
NOTE 2 - Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"). The costs and expenses were:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
Prudential-Bache Properties,
Inc. ("PBP") and affiliates $10,070 $15,398 $26,663 $55,907
Related Federal Insured L.P.
(the "Related General
Partner") and affiliates 1,120 1,026 31,120 3,078
------- ------- ------- -------
$11,190 $16,424 $57,783 $58,985
======= ======= ======= =======
The present owner of the Cross Creek property ("Walsh/Cross Creek
L.P.") acquired title to the property upon the default of the original
developer. Significant interests in Walsh/Cross Creek L.P. are held by
affiliates of the Related General Partner. The Partnership made a loan to
Walsh/Cross Creek L.P. (the "Cross Creek Loan") to pay for costs incurred to
complete construction and to fund operating deficits. The Cross Creek Loan bears
interest at the prime rate plus 1.0% and is due on January 1, 2030 or on the
occurrence of other events as more fully described in the loan agreement. The
amount loaned to Walsh/Cross Creek L.P. is classified as a loan receivable from
affiliate and is anticipated to be repaid from cash flows from the property.
Stephen M. Ross holds a majority interest in the Related General Partner and has
guaranteed to the Partnership, subject to certain conditions contained in the
Guarantee Agreement and Amendment to the Guarantee as follows: (i) the
performance of all obligations for the payment of interest on the Cross Creek
Loan when due in accordance with documentation evidencing the Cross Creek Loan;
(ii) the payment of principal on the Cross Creek Loan on or before December 31,
2000; (iii) the repayment on or before December 31, 2000 of the $1,783,900
equity loan (currently recorded at zero) previously made to the original
developer of Cross Creek; and (iv) the payment when due of interest and
principal at an interest rate of 8.95% of the $17,494,100 first mortgage loan
previously made to the original developer.
-6-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 2 - Related Parties (continued)
In accordance with the Guarantee Agreement and Amendment to the
Guarantee and except as otherwise required by HUD, available cash flow or
capital proceeds from the Cross Creek property will be applied first to all
expenses of operating and maintaining the property, debt service and/or
satisfaction of the mortgage loan, equity loan and Cross Creek Loan, then to
reimburse Stephen M. Ross for operating deficit payments which he has made
(amounting to $175,000 for the nine months ended September 30, 1996 and
$3,102,732 cumulatively), then to additional interest, default rate and
guaranteed rate payments as set forth in the Subordinated Note and the
Additional Interest Guarantee.
The Partnership maintained an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of PBP, for investment of its available
cash in short-term instruments in 1995 in accordance with the guidelines
established by the Partnership Agreement.
Prudential Securities Incorporated ("PSI") owns 6,655 BUC$ at September
30, 1996.
NOTE 3 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes
et al. v. Prudential Securities Group, Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership, against the Partnership, PBP, PSI and a number
of other defendants. Plaintiffs alleged violations of the Racketeer Influenced
and Corrupt Organizations Act ("RICO") statutes, breach of fiduciary duty, fraud
and deceit, negligence, and demanded an accounting. Plaintiffs sought
unspecified compensatory, punitive and treble damages, and rescission, including
costs and attorneys' fees, but the only relief sought against the Partnership
was an accounting. The defendants filed a motion to dismiss on December 22,
1993.
By order of the Judicial Panel on Multidistrict Litigation dated April
14, 1994, the Kinnes case, together with a number of other actions not involving
the Partnership, were transferred to a single judge of the United States
District Court for the Southern District of New York and consolidated for
pretrial proceedings under the caption In re Prudential Securities Incorporated
Limited Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs
in the transferred cases filed a complaint that consolidated the previously
filed complaints and named as defendants, among others, PSI, certain of its
present and former employees and the General Partners. The Partnership was not
named a defendant in the consolidated complaint, but the name of the Partnership
was listed as being among the limited partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered into
a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing and
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
The Related General Partner has been engaged in settlement negotiations
with counsel for the plaintiffs. In the event a settlement can not be reached,
the Related General Partner believes it has meritorious defenses to the
consolidated complaint and intends to vigorously defend this action.
-7-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 4 - Subsequent Events
In November 1996, distributions of approximately $627,000 and $13,000
were paid to the BUC$holders and General Partners, respectively, for the quarter
ended September 30, 1996.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
- - -------------------------------
The Partnership originally invested in four mortgage loans which finance
multifamily residential rental property ("Mortgages") one of which was prepaid
in 1994.
All base interest and initially at least 90% in the aggregate of the
principal of the loans made by the Partnership are coinsured by the FHA (80% of
the 90%) and an affiliate of the Related General Partner (20% of the 90%), with
the remaining 10% of the Partnership's original portfolio comprised of uninsured
non-interest bearing equity loans made directly to the same developers as are
the Mortgages.
The Partnership is entitled to receive additional interest on each
Mortgage from the annual net cash flow of the development and from a percentage
of the residual value upon sale or refinancing. The receipt of additional
interest is dependent upon the economic performance of the underlying
properties. The Partnership received additional interest payments of
approximately $77,000 from Woodgate Manor during the nine months ended September
30, 1996 all of which was received in the second quarter.
Stephen M. Ross has guaranteed repayment of the principal and interest
on a loan to the Cross Creek developer. See Note 2 to the financial statements
for further information. Mr. Ross remains in compliance with his obligations
under the Guarantee Agreement and Amendment to the Guarantee. However,
significant portions of his assets are in the form of partnership interests and
corporate stock which are pledged or are otherwise illiquid. Furthermore, a
significant portion of the cash flow which Mr. Ross would otherwise be expected
to receive from his business operations is presently pledged to meet other
obligations. Mr. Ross also has contingent liabilities that, if simultaneously
called upon, could result in Mr. Ross having insufficient liquid assets to meet
all of his current liabilities. There can be no assurance that Mr. Ross will
have the liquidity necessary to continue to comply with his obligations under
the Guarantee Agreement. In addition, Mr. Ross has capitalized the Related
General Partner with a demand promissory note and, if called upon to pay all or
a portion of this note, there is no assurance that he will have the liquidity
necessary to meet such demand.
At the beginning of the year, the Partnership had cash and cash
equivalents of approximately $1,146,000. After the receipt of net cash flow from
operations, principal payments received on mortgage loans and the payment of
distributions, the Partnership had approximately $1,229,000 in cash and cash
equivalents at September 30, 1996. The third quarter distribution of
approximately $627,000 was paid to BUC$holders in November 1996 from adjusted
cash flow from operations. Debt service payments from mortgage loans are
anticipated to provide sufficient liquidity to meet the operating expenditures
of the Partnership and to pay distributions in the future.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed, that will or are likely
to impact liquidity in a material way. All base interest and the principal of
the Partnership's investments in mortgage loans are insured or co-insured by the
FHA and a private mortgage lender (which is an affiliate of the Related General
Partner). The Partnership's investment in unsecured non-interest bearing equity
loans (which represent approximately 10% of the Partnership's original
portfolio) are secured by a Partnership interest in properties which are
diversified by location so that if one state is experiencing downturns in the
economy, the remaining properties may be experiencing upswings. However, the
geographic diversifications of the portfolio may not protect against a general
downturn in the national economy.
Results of Operations
- - ---------------------
The Partnership's net income for the three and nine months ended
September 30, 1996 decreased by approximately $57,000 and $49,000 as compared to
the corresponding periods in 1995 due to the reasons discussed below.
-9-
<PAGE>
Interest income from temporary investments decreased by approximately
$2,000 and $7,000 for the three and nine months ended September 30, 1996 as
compared to the corresponding periods in 1995 primarily due to a decrease in
interest rates.
General and administrative expenses decreased approximately $12,000 and
$20,000 for the three and nine months ended September 30, 1996 as compared to
the corresponding periods in 1995 primarily due to an overaccrual of legal
expenses at September 30, 1995 which was corrected in the fourth quarter of
1995.
Additional Information
- - ----------------------
The following table lists the respective occupancy rates at the
properties securing Mortgages as of October 27, 1996:
Property Location Occupancy %
-------- -------- -----------
Cross Creek Apartments Charlotte, NC 96.4%
Weatherly Walk Apartments Fayetteville, GA 97.4%
Woodgate Manor Gainesville, FL 95.2%
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Incorporated by reference to Note 3 to the
financial statements filed herewith in Item 1 of Part I of the
Partnership's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(a) and 4(a) Agreement of Limited Partnership, as amended
(incorporated by reference to Exhibits 3(a) and 4(a)
to the Partnership's Prospectus, dated December 11,
1987, filed pursuant to Rule 424(b) under the
Securities Act of 1933, File No. 33-17059).
3(b) and 4(b) Certificate of Limited Partnership, as
amended (incorporated by reference to Exhibits 3(a)
and 4(a) to the Registration Statement on Form S-11,
(File No. 33-17059) dated November 17, 1987 and to
Amendment No. 2 to such Registration Statement dated
December 2, 1987).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - None
-11-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE INSURED L.P.
By: Related Federal Insured L.P.
A Delaware limited partnership, General Partner
By: RFI Associates, Inc.
A Delaware corporation,
general partner of the General Partner
Date: November 13, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: November 13, 1996 By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer
(Principal Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: November 13, 1996 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Eagle Insured L.P. and is qualified
in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000821203
<NAME> Eagle Insured L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,228,628
<SECURITIES> 0
<RECEIVABLES> 30,982,439
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 950,637
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,161,704
<CURRENT-LIABILITIES> 172,371
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 32,989,333
<TOTAL-LIABILITY-AND-EQUITY> 33,161,704
<SALES> 0
<TOTAL-REVENUES> 2,163,943
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 152,379
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,011,564
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,011,564
<EPS-PRIMARY> .70
<EPS-DILUTED> 0
</TABLE>
