<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission file number 0-17737
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Fiduciary Capital Partners, L.P.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0653600
--------------------- -----------------
(State of organization) (I.R.S. Employer
Identification No.)
1530 16th Street
Suite 200
Denver, Colorado 80202
-------------------- --------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (800) 866-7607
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Fiduciary Capital Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 2000
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
September 30, 2000 3
Balance Sheets - September 30, 2000 and
December 31, 1999 5
Statements of Operations for the three months
ended September 30, 2000 and 1999 6
Statements of Operations for the nine months
ended September 30, 2000 and 1999 7
Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 8
Statements of Changes in Net Assets for the
nine months ended September 30, 2000 and
for the year ended December 31, 1999 9
Selected Per Unit Data and Ratios 10
Notes to Financial Statements 11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
------ ---------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
MANAGED COMPANIES:
$1,967,040 LMC Corporation, 12.00%
Senior Subordinated 11/01/96
Revolving Notes through
due 10/31/00(1) 01/13/99 $ 1,967,040 $ 1
$41,404 LMC Corporation, 12.00% 02/07/00
Promissory Notes due through
8/7/00(2) 04/11/00 41,404 1
93,537 sh. LMC Corporation,
Class B Preferred Stock* 08/09/99 935,370 1
260,400 sh. LMC Corporation,
Class C Preferred Stock* 06/10/94 2,596,621 1
5,523,500 sh. LMC Corporation, 02/09/96
Common Stock* through
08/05/98 3,034,549 1
52.08 sh. LMC Credit Corp.,
Common Stock* 02/09/96 1 1
------------ -------- ----
8,574,985 6 0.0%
------------ -------- ----
$1,460,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(3) 05/24/95 1,429,618 758,938
14,265.6 sh. R.B.M. Precision Metal
Products, Inc., Warrants to
Purchase Common Stock* 05/24/95 82,955 1
14,392 sh. R.B.M. Precision Metal
Products, Inc., Common
Stock* 12/09/98 1 1
------------ -------- ----
1,512,574 758,940 78.5
------------ -------- ----
Total Investments in Managed Companies (140.2% of net assets) 10,087,559 758,946 78.5
------------ -------- ----
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
3
<PAGE> 4
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
--------- ---------- ---------- --------- ------- -----------
<S> <C> <C> <C> <C> <C>
NON-MANAGED COMPANIES:
$228,738 Niigata Engineering 12/01/99
Co., Ltd., through
Receivables(4) 01/03/00 207,791 207,791
----------- ------- -----
207,791 207,791 21.5
----------- ------- -----
989,414 sh. WasteMasters, Inc.,
Common Stock(5)* 06/03/98 1,321,795 1
----------- ------- -----
1,321,795 1 0.0
----------- ------- -----
Total Investment in Non-Managed
Companies (38.4% of net assets) 1,529,586 207,792 21.5
----------- ------- -----
Total Investments (178.6% of net assets) $11,617,145 $966,738 100.0%
=========== ======== =====
</TABLE>
(1) The accrual of interest on the notes was discontinued by the Fund
effective July 1, 1999.
(2) The Fund has not accrued any interest income on these notes.
(3) The terms of the notes provide for three equal annual installments of
$486,667 commencing on May 24, 2000. However, the Fund is a party to
an Intercreditor and Subordination Agreement with R.B.M. Precision
Metal Products, Inc.'s ("RBM's") other creditors, which prohibits
principal payments on the notes prior to October 31, 2000 and
restricts payments thereafter, based on a number of financial formulas
contained in the Agreement.
(4) These are non-interest bearing receivables, which were purchased from
LMC Corporation ("LMC") at a discount. Payments are due on November
21, 2000, May 21, 2001 and November 21, 2001 each in the amount of
$55,639 and on May 21, 2002 in the amount of $61,821.
(5) See Note 5 regarding significant issues concerning the ownership and
transferability of this stock.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
4
<PAGE> 5
FIDUCIARY CAPITAL PARTNERS, L.P.
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
ASSETS:
Investments:
Portfolio investments, at value:
Managed companies (amortized cost -
$10,087,559 and $10,031,554,
respectively) $ 758,946 $ 1,017,543
Non-managed companies (amortized cost-
$1,529,586 and $1,415,263, respectively) 207,792 93,469
Temporary investments, at amortized cost -- 649,689
----------- -----------
Total investments 966,738 1,760,701
Cash and cash equivalents 195,291 218,111
Accrued interest receivable 21,008 21,924
Other assets 32,517 24,333
----------- -----------
Total assets $ 1,215,554 $ 2,025,069
=========== ===========
LIABILITIES:
Payable to affiliates $ 96,409 $ 33,048
Accounts payable and accrued liabilities 577,965 582,598
Distributions payable to partners -- 310,992
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Total liabilities 674,374 926,638
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COMMITMENTS AND CONTINGENCIES
NET ASSETS:
Managing General Partner (196,777) (196,777)
Limited Partners (equivalent to $0.72
and $1.26, respectively, per limited
partnership unit based on 1,026,273
units outstanding) 737,957 1,295,208
----------- -----------
Net assets 541,180 1,098,431
----------- -----------
Total liabilities and net assets $ 1,215,554 $ 2,025,069
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
5
<PAGE> 6
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 60,470 $ 89,557
----------- -----------
Total investment income 60,470 89,557
----------- -----------
Expenses:
Fund administration fees 35,843 35,843
Investment advisory fees 22,451 24,276
Administrative expenses 20,275 20,275
Professional fees 20,267 134,577
Independent General Partner fees
and expenses 12,743 12,751
Other expenses 28,235 14,592
----------- -----------
Total expenses 139,814 242,314
----------- -----------
NET INVESTMENT LOSS (79,344) (152,757)
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments -- 399,963
Net change in unrealized loss on investments (314,602) (3,615,611)
----------- -----------
Net loss on investments (314,602) (3,215,648)
----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (393,946) $(3,368,405)
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
6
<PAGE> 7
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 190,778 $ 315,944
----------- -----------
Total investment income 190,778 315,944
----------- -----------
Expenses:
Fund administration fees 107,528 107,528
Investment advisory fees 67,352 72,826
Administrative expenses 60,828 60,828
Professional fees 43,960 177,298
Independent General Partner fees
and expenses 38,260 50,633
Other expenses 115,499 46,300
----------- -----------
Total expenses 433,427 515,413
----------- -----------
NET INVESTMENT LOSS (242,649) (199,469)
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments -- 393,808
Net change in unrealized loss on investments (314,602) (3,447,942)
----------- -----------
Net loss on investments (314,602) (3,054,134)
----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (557,251) $(3,253,603)
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
7
<PAGE> 8
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (557,251) $(3,253,603)
Adjustments to reconcile net decrease in net assets
resulting from operations to net cash used in
operating activities:
Accreted discount on portfolio investments (33,327) (8,256)
Interest income received in stock -- (85,620)
Change in assets and liabilities:
Accrued interest receivable 916 82,504
Other assets (8,184) (385)
Payable to affiliates 63,361 10,689
Accounts payable and accrued liabilities (4,633) 576
Net realized gain on investments -- (393,808)
Net change in unrealized loss on investments 314,602 3,447,942
----------- -----------
Net cash used in operating activities (224,516) (199,961)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (225,570) (904,390)
Proceeds from dispositions of portfolio investments 88,569 437,587
Sale of temporary investments, net 649,689 997,142
----------- -----------
Net cash provided by investing activities 512,688 530,339
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (310,992) (1,008,813)
----------- -----------
Net cash used in financing activities (310,992) (1,008,813)
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (22,820) (678,435)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 218,111 837,202
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 195,291 $ 158,767
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
AND FOR THE YEAR ENDED DECEMBER 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Decrease in net assets resulting from operations:
Net investment loss $ (242,649) $ (326,228)
Net realized gain on investments -- 493,358
Net change in unrealized loss on
investments (314,602) (7,712,001)
------------ ------------
Net decrease in net assets resulting
from operations (557,251) (7,544,871)
Repurchase of limited partnership units -- (383,736)
Return of capital distributions -- (1,319,805)
------------ ------------
Total decrease in net assets (557,251) (9,248,412)
Net assets:
Beginning of period 1,098,431 10,346,843
------------ ------------
End of period (including no undistributed
net investment income) $ 541,180 $ 1,098,431
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
9
<PAGE> 10
FIDUCIARY CAPITAL PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per Unit Data:
Investment income $ .06 $ .08 $ .19 $ .28
Expenses (.14) (.22) (.43) (.46)
------------- ------------- ------------- -------------
Net investment loss (.08) (.14) (.24) (.18)
Net realized gain on investments -- .36 -- .36
Net change in unrealized loss on investments (.30) (3.25) (.30) (3.11)
Distributions declared to partners -- (.30) -- (.90)
------------- ------------- ------------- -------------
Net decrease in net asset value (.38) (3.33) (.54) (3.83)
Net asset value:
Beginning of period 1.10 9.01 1.26 9.51
------------- ------------- ------------- -------------
End of period $ 0.72 $ 5.68 $ 0.72 $ 5.68
============= ============= ============= =============
Ratios (annualized):
Ratio of expenses to average net assets 75.76% 12.21% 64.14% 7.59%
Ratio of net investment loss to average
net assets (43.00)% (7.70)% (35.91)% (2.94)%
Number of limited partnership units at
end of period 1,026,273 1,109,694 1,026,273 1,109,694
</TABLE>
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
10
<PAGE> 11
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(unaudited)
1. GENERAL
The accompanying unaudited interim financial statements include all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion
of FCM Fiduciary Capital Management Company ("FCM"), the Managing General
Partner of Fiduciary Capital Partners, L.P. (the "Fund"), necessary to fairly
present the financial position of the Fund as of September 30, 2000 and the
results of its operations, changes in net assets and its cash flows for the
periods then ended.
These financial statements should be read in conjunction with the Significant
Accounting Policies and other Notes to Financial Statements included in the
Fund's annual audited financial statements for the year ended December 31,
1999.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM is entitled to
receive, subject to certain limitations, a subordinated monthly fee at the
annual rate of 1% of the Fund's available capital, as defined in the
Partnership Agreement. Investment advisory fees of $67,352 are payable to FCM
for the nine months ended September 30, 2000. The payment of these fees has
been deferred pursuant to the applicable subordination provisions until the
Limited Partners receive distributions equal to a cumulative non-compounded 6%
return on their adjusted capital contributions, as defined in the Partnership
Agreement.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of 0.45% of net proceeds available for investment, as
defined in the Partnership Agreement. Fund administration fees of $107,528 were
paid by the Fund for the nine months ended September 30, 2000. FCM is also
reimbursed, subject to various limitations, for administrative expenses
incurred in providing accounting and investor services to the Fund. The Fund
reimbursed FCM for administrative expenses of $60,828 for the nine months ended
September 30, 2000.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and Fiduciary Capital Pension Partners,
L.P., an affiliated fund, (collectively, the "Funds") an annual fee of $30,000,
payable monthly in arrears, together with all out-of-pocket expenses. Each
Fund's allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses paid by the Fund for the nine months ended
September 30, 2000 totaled $38,260.
11
<PAGE> 12
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(unaudited)
5. COMMITMENTS AND CONTINGENCIES
LMC Corporation During February 2000, the Fund agreed to advance up to $111,502
to LMC. $41,404 of these advances was structured as the purchase of promissory
notes, and additional advances totaling $58,183 were expensed by the Fund.
Remaining amounts to be advanced, as of September 30, 2000, total $11,915.
WasteMasters, Inc. ("WasteMasters") The Fund acquired its WasteMasters stock,
which trades on the OTC Bulletin Board System, from Nikko Trading of America
Corporation ("Nikko") on June 3, 1998. The stock was subject to a 24-month
lock-up period through May 2000. Upon expiration of the lock-up period, the
Fund requested that WasteMasters issue the Fund a new stock certificate without
the restrictive legend that existed on the Fund's original certificate, so that
the stock could be sold. WasteMasters refused to comply with this request.
WasteMasters and Nikko have been in litigation with each other and, during
March 2000, the court involved with this litigation authorized the cancellation
of all WasteMasters stock that had been issued to Nikko, including the shares
that Nikko had previously transferred to the Fund. At this time, the Fund is
uncertain as to how, or when, these issues regarding the ownership and
transferability of its WasteMasters stock will be resolved. The Fund has
retained counsel and WasteMasters' attorneys are considering the Fund's request
to be treated as a bona fide stockholder. Others are in the same position as
the Fund and have requested similar treatment. WasteMasters' attorneys have
indicated that it may take until November 2000 to make a determination as to
the Fund's position as a stockholder. There can be no assurance that a
conclusion favorable to the Fund will be achieved, or that a determination will
be made within the indicated time frame.
12
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Fund's
unaudited Financial Statements and the Notes thereto. This report contains, in
addition to historical information, forward-looking statements that include
risks and other uncertainties. The Fund's actual results may differ materially
from those anticipated in these forward-looking statements. While the Fund can
not always predict what factors would cause actual results to differ materially
from those indicated by the forward-looking statements, factors that might
cause such a difference include general economic and business conditions,
competition and other factors discussed elsewhere in this report. Readers are
urged to consider statements that include the terms "believes", "expects",
"plans", "anticipates", "intends" or the like to be uncertain and
forward-looking. The Fund undertakes no obligation to release publicly any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of anticipated
or unanticipated events.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Fund held portfolio investments in two Managed
Companies and two Non-Managed Companies, with an aggregate original cost of
approximately $11.6 million. The value of these portfolio investments, which
were made from net offering proceeds and the reinvestment of proceeds from the
sale of other portfolio investments, represents approximately 178.6% of the
Fund's net assets.
As of September 30, 2000, the Fund's remaining liquid assets were invested in
money market funds. These funds are available to fund the annual repurchase
offer, to fund follow-on investments in existing portfolio companies, to pay
Fund expenses and for distribution to the partners.
Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered to purchase from its Limited Partners up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to repurchase up to an additional 2% of the outstanding
Units. If Units in excess of this amount are tendered, Units are purchased on a
pro rata basis after giving priority to Limited Partners owning less than 100
Units. The 2000 repurchase offer was mailed to the Limited Partners during
October 2000. The actual redemption of Units will occur on November 21, 2000.
The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
During 1999, the General Partners considered a number of possible plans that
would have permitted the Fund to be liquidated by the end of 2000. However, it
was determined that none of these plans was feasible. As a result, it is
currently expected that the Fund will remain in existence until the remaining
debt investments mature, are sold or are prepaid by the respective portfolio
companies, and the remaining equity investments are sold or otherwise
liquidated.
13
<PAGE> 14
During December 1999, the Fund purchased $117,460 of Niigata Engineering Co.,
Ltd. ("Niigata") receivables from LMC at a cost of $92,767. An additional
$166,917 of Niigata receivables were purchased during January 2000 at a cost of
$151,235. These various receivables were payable on specified dates between May
21, 2000 and May 21, 2002.
The initial payment, in the amount of $55,639, was due from Niigata on May 21,
2000. Niigata initially refused to make the payment, due to various outstanding
claims they have made against LMC, which is in bankruptcy proceedings. LMC
disputes the validity of these claims. Niigata ultimately made the full amount
of the payment to the Fund on June 30, 2000.
During February 2000, the Fund agreed to advance up to $111,502 to LMC in order
to provide operating capital to LMC (see following discussion regarding LMC).
$41,404 of these advances was structured as the purchase of promissory notes,
and additional advances totaling $58,183 were expensed by the Fund. Remaining
amounts to be advanced, as of September 30, 2000, total $11,915.
Payables to affiliates increased $63,361 from $33,048 at December 31, 1999 to
$96,409 at September 30, 2000. This increase resulted primarily from the
deferral of the payment of FCM's subordinated investment advisory fees for the
nine months ended September 30, 2000. The payment of these fees will be
deferred pursuant to the applicable subordination provisions until the Limited
Partners receive distributions equal to a cumulative non-compounded 6% return
on their adjusted capital contributions, as defined in the Partnership
Agreement.
Distributions payable to partners decreased from $310,992 at December 31, 1999
to zero at September 30, 2000. This decrease resulted from a decrease in the
per Unit distribution rate from $0.30 for the three months ended December 31,
1999 to zero for the three months ended September 30, 2000. It is unlikely that
the Fund will be able to pay quarterly distributions during the remainder of
2000 and beyond. Distributions will be addressed on a quarterly basis by the
General Partners and will involve the consideration of a number of issues.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment loss was $79,344 for the three months ended September
30, 2000 as compared to a net investment loss of $152,757 for the corresponding
period of the prior year. Net investment loss per limited partnership unit
decreased from $0.14 to $0.08 and the ratio of net investment loss to average
net assets increased from 7.70% to 43.00% for the three months ended September
30, 2000, as compared to the corresponding period of the prior year.
The Fund's net investment loss was $242,649 for the nine months ended September
30, 2000 as compared to a net investment loss of $199,469 for the corresponding
period of the prior year. Net investment loss per limited partnership unit
increased from $0.18 to $0.24 and the ratio of net investment loss to average
net assets increased from 2.94% to 35.91% for the nine months ended September
30, 2000, as compared to the corresponding period of the prior year.
The net investment loss for the three months ended September 30, 2000 decreased
primarily as a result of a decrease in professional fees, as compared to the
corresponding period of the prior year. The decrease in professional fees was
partially offset by a decrease in interest income and an increase in other
expenses.
14
<PAGE> 15
The net investment loss for the nine months ended September 30, 2000 increased
primarily as a result of a decrease in interest income and an increase in other
expenses, as compared to the corresponding period of the prior year. The
negative effect of these items was partially offset by decreases in investment
advisory fees, professional fees and Independent General Partner fees and
expenses.
Investment income decreased $29,087 and $125,166, or 32.5% and 39.6%, for the
three and nine month periods ended September 30, 2000, as compared to the
corresponding periods of the prior year. These decreases resulted primarily
from the decision to stop accruing interest on the Fund's LMC debt investments
effective during July 1999 and a decrease in the amount of the Fund's temporary
and money market investments. The amount of the Fund's temporary and money
market investments decreased because of (i) cash distributions made by the Fund
during 1999 that constituted a return of capital, (ii) purchases of additional
LMC follow-on investments (including the Niigata receivables), and (iii) the
Fund's repurchase of 7.52% of its Units during the fourth quarter of 1999. The
negative effect of these items was partially offset by interest income earned
on the Niigata receivables and an increase in the interest income earned on the
RBM Precision Metal Products, Inc. ("RBM") subordinated debt investments. As
discussed below, the Fund did not record any interest income on the RBM notes
during the period from August 25, 1998 through May 24, 1999.
Total expenses decreased $102,500 and $81,986, or 42.3% and 15.9%, for the
three and nine month periods ended September 30, 2000, as compared to the
corresponding periods of the prior year. These decreases resulted primarily
from decreases in professional fees. Investment advisory fees and Independent
General Partner fees and expenses also decreased, although by smaller amounts.
These decreases were partially offset by increases in other expenses incurred
in connection with the Fund's LMC investments.
Net Unrealized Loss on Investments
FCM values the Fund's portfolio investments on a weekly basis utilizing a
variety of methods. For securities that are publicly traded and for which
market quotations are available, valuations are set by the closing sales or an
average of the closing bid and ask prices, as of the valuation date.
Fair value for securities that are not traded in any liquid public markets or
that are privately held are determined pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable
for such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method is used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.
15
<PAGE> 16
As of December 31, 1999, the Fund had recorded $10,335,805 of unrealized loss
on investments. The increase in unrealized loss on investments during the three
and nine months ended September 30, 2000 and the cumulative net unrealized loss
on investments as of September 30, 2000 consisted of the following components:
<TABLE>
<CAPTION>
Net Changes in
Unrealized Gain (Loss)
------------------------------------------- Net Unrealized
During the Three During the Nine Gain (Loss)
Months Ended Months Ended Recorded As of
Portfolio Company September 30, 2000 September 30, 2000 September 30, 2000
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
LMC $ (314,602) $ (314,602) $ (8,574,979)
RBM -- -- (753,634)
WMI -- -- (1,321,794)
------------ ------------ ------------
$ (314,602) $ (314,602) $(10,650,407)
============ ============ ============
</TABLE>
LMC experienced significant cash flow shortfalls in December 1999 and January
2000. These cash flow shortfalls, combined with significant reductions in the
cash available under the Company's revolving line of credit with CIT
Corporation, forced a cessation of production of equipment and severely
curtailed LMC's ability to fulfill orders for spare parts.
LMC has held discussions with several potential purchasers of its business, in
whole or in part. No meaningful purchase offers have been received to date. LMC
has consummated a consignment joint venture arrangement with respect to its
spare parts business and the majority of LMC's employees have been released.
In an effort to preserve value and facilitate the possible sale of LMC's
business, the Fund agreed during February 2000 to advance up to $111,502 to
LMC. $41,404 of these advances was structured as the purchase of promissory
notes, and additional advances totaling $58,183 were expensed by the Fund.
Remaining amounts to be advanced, as of September 30, 2000, total $11,915.
LMC received a notice of default, dated April 6, 2000, from CIT Corporation
with respect to its revolving line of credit. On April 28, 2000, LMC filed for
Chapter 11 bankruptcy protection.
The Fund wrote its LMC investment down by $540,800 and $317,280 during 1995 and
1997, respectively. As a result of the above-described developments, the Fund
created additional reserves of $7,402,297 and $314,602 against the carrying
values of the Fund's LMC investment during the year ended December 31, 1999 and
the nine months ended September 30, 2000, respectively. Thus, the Fund's total
LMC investment has a net carrying value of only $6, versus its cost of
$8,574,985.
RBM had a record year for fiscal 1998, with sales of approximately $30 million
and EBITDA of approximately $2.7 million. However, these sales were achieved
primarily through one contract with Digital Equipment Corporation ("DEC").
During August 1998, RBM notified the Fund that anticipated sales to DEC and
other large customers were expected to decline significantly in the upcoming
year. Of particular concern were sales to DEC, which was acquired by Compaq
Computer Corp. As a result of the expected decline in sales, RBM began the
process of restructuring its debt, including the subordinated debt held by the
Fund. The Fund received the quarterly interest payment that was due from RBM on
August 24, 1998. The interest payment that was due during November 1998 was
deferred and subsequently converted to equity pursuant to the restructuring
described below.
16
<PAGE> 17
During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Wells Fargo Business Credit, replaced Bank of America. As
part of this transaction, RBM's principle shareholder, 13i Capital Corporation,
contributed additional equity to the company and the subordinated lenders,
including the Fund, agreed to accept shares of RBM's common stock as payment
for the next three quarterly interest payments beginning with the payment that
was due during November 1998. As a consequence, the Fund's ownership of RBM, on
a fully diluted basis, increased from 6.6% to 8.1%, assuming exercise of its
warrants. The restructuring was designed to provide RBM with a period of time
in which to secure additional customers and return to a more stable financial
position under which RBM could meet its interest obligations to its creditors,
including the Fund.
As a result of these developments, the Fund recorded aggregate writedowns of
$753,634 relating to RBM during the year ended December 31, 1998.
RBM resumed paying the quarterly interest payments in cash, commencing with the
quarterly interest payment due on August 24, 1999. The Fund placed a $1
aggregate valuation on the RBM common stock that was received in payments of
the interest with respect to the nine-month period beginning August 25, 1998
and ending May 24, 1999.
For its fiscal year ended October 31, 1999, RBM's revenues were $11.6 million
versus a budget of $12.0 million. For the year, RBM's loss was $1.3 million
(pretax) versus a budgeted loss of $1.9 million.
RBM projects sales of approximately $17 million for its fiscal year ended
October 31, 2000, with positive EBITA. RBM reported sales of $12.1 million,
positive EBITA of $1.2 million and a net loss of $0.1 million for the nine
months ended July 31, 2000.
RBM remains current with its interest payments to the Fund. However, on August
24, 2000, RBM notified the Fund that the company failed to meet two of the
financial covenants included in the Fund's subordinated loan agreement with RBM
for the nine months ended July 31, 2000. Management of the Fund agreed to a
waiver with respect to these defaults, in part, because RBM represented to the
Fund that based on booked orders, they expect all financial covenants to be met
for their fiscal year ending October 31, 2000. The Fund executed the waiver
with respect to the covenants for the nine months ended July 31, 2000 without
waiving or effecting its rights for any other period.
Originally, the Fund's RBM debt was scheduled to be repaid over the three years
ending May 2002. However, the Fund and RBM's other creditors entered into an
Intercreditor and Subordination Agreement ("Intercreditor Agreement") in
connection with a restructuring of RBM's senior debt in late 1998. The
Intercreditor Agreement prohibits principal payments of RBM's subordinated debt
prior to October 31, 2000 and restricts payments thereafter, based on a number
of financial formulas contained in the Intercreditor Agreement. Therefore, both
the amount and timing of the principal payments to be received by the Fund are
dependent upon RBM's future operating results, including specifically the
EIBITDA levels achieved.
During June 1998, the Fund exchanged its Atlas (which was in bankruptcy
proceedings) subordinated notes and warrants for 989,414 shares of common stock
of WasteMasters, a waste management company. The Fund acquired its WasteMasters
stock, which trades on the OTC Bulleting Board System ("WAST"), from Nikko
Trading of America Corporation ("Nikko"). The stock was subject to a 24-month
lock-up period through May 2000. Upon expiration of the lock-
17
<PAGE> 18
up period, the Fund requested that WasteMasters issue the Fund a new stock
certificate without the restrictive legend that existed on the Fund's original
certificate, so that the stock could be sold. WasteMasters refused to comply
with this request. WasteMasters and Nikko have been in litigation with each
other and, during March 2000, the court involved with this litigation
authorized the cancellation of all WasteMasters stock that had been issued to
Nikko, including the shares that Nikko had previously transferred to the Fund.
At this time, the Fund is uncertain as to how, or when, these issues regarding
the ownership and transferability of its WasteMasters stock will be resolved.
The Fund has retained counsel and WasteMasters' attorneys are considering the
Fund's request to be treated as a bona fide stockholder. Others are in the same
position as the Fund and have requested similar treatment. WasteMasters'
attorneys have indicated that it may take until November 2000 to make a
determination as to the Fund's position as a stockholder. There can be no
assurance that a conclusion favorable to the Fund will be achieved, or that a
determination will be made within the indicated time frame.
The WasteMasters common stock closed at $1.78 (an average of the closing bid
and ask prices) on the date of the exchange (June 3, 1998). Based on this
price, the Fund's WasteMasters common stock had a trading value of $1,761,157
on the date of the exchange. However, due to a number of factors, including the
speculative nature of the WasteMasters stock, the two year lock-up period and
the relative size of the Fund's stock position versus the daily trading volume,
FCM decided to carry the WasteMasters stock at the same $1 nominal value that
the Atlas securities were previously carried by the Fund.
The Fund recorded a realized loss of $2,560,453 on the exchange, which is equal
to the amount of the loss that the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,321,794 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.
The 52-week low for the WasteMasters common stock is $0.02 per share and the
current bid price (October 27, 2000) is $0.16 per share.
18
<PAGE> 19
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports to be filed:
Exhibit No. Description
11.1 Statement of Computation of Net Investment Income Per Limited
Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during the third
quarter of the fiscal year ending December 31, 2000.
19
<PAGE> 20
SIGNATURE
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.
Fiduciary Capital Partners, L.P.
(Registrant)
By: FCM Fiduciary Capital Management Company
Managing General Partner
Date: October 29, 2000 By: /s/ Donald R. Jackson
------------------------------------------
Donald R. Jackson
Chief Financial Officer
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
11.1 Statement of Computation of Net Investment Income Per Limited
Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
</TABLE>
E-1
