<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 March 31, 2000
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 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.)
410 17th Street
Suite 400
Denver, Colorado 80202
------------------- ---------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (800) 866-7607
--------------
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> 2
Fiduciary Capital Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 2000
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
March 31, 2000 3
Balance Sheets - March 31, 2000 and
December 31, 1999 5
Statements of Operations for the three months
ended March 31, 2000 and 1999 6
Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 7
Statements of Changes in Net Assets for the
three months ended March 31, 2000 and
for the year ended December 31, 1999 8
Selected Per Unit Data and Ratios 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
MARCH 31, 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 $ 273,200
$59,468 LMC Corporation, 12.00% 02/07/00
Promissory Notes due through
8/7/00(2) 03/22/00 59,468 59,468
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
- ------------ ------------------------ -------- ------------ ----------- --------
8,593,049 332,672 24.9%
- ------------ ------------------------ -------- ------------ ----------- --------
$1,460,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(3) 05/24/95 1,421,327 750,647
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
- ------------ ------------------------ -------- ------------ ----------- --------
1,504,283 750,649 56.3
- ------------ ------------------------ -------- ------------ ----------- --------
Total Investments in Managed Companies (105.3% of net assets) 10,097,332 1,083,321 81.2
------------ ----------- --------
</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
MARCH 31, 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:
$284,377 Niigata Engineering 12/01/99
Co., Ltd., through
Receivables(4)* 01/03/00 251,430 251,430
- ------------ ------------------------ -------- ------------ ----------- --------
251,430 251,430 18.8
- ------------ ------------------------ -------- ------------ ----------- --------
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 (24.4% of net assets) 1,573,225 251,431 18.8
------------ ----------- --------
Total Investments (129.7% of net assets) $ 11,670,557 $ 1,334,752 100.0%
============ =========== ========
</TABLE>
(1) The accrual of interest on the notes was discontinued by the Fund
effective July 1, 1999.
(2) The Fund has committed to provide up to $111,502 of financing pursuant to
the terms of these notes. 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 May 21, 2000,
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) The WasteMasters, Inc. common stock, which trades on the OTC Bulletin
Board System, is subject to a 24-month lock up period through May 2000, a
call option and a right of first refusal.
* 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
MARCH 31, 2000 AND DECEMBER 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
ASSETS:
Investments:
Portfolio investments, at value:
Managed companies (amortized cost -
$10,097,332 and $10,031,554,
respectively) $ 1,083,321 $ 1,017,543
Non-managed companies (amortized cost-
$1,573,225 and $1,415,263, respectively) 251,431 93,469
Temporary investments, at amortized cost -- 649,689
----------- -----------
Total investments 1,334,752 1,760,701
Cash and cash equivalents 291,364 218,111
Accrued interest receivable 20,432 21,924
Other assets 15,533 24,333
----------- -----------
Total assets $ 1,662,081 $ 2,025,069
=========== ===========
LIABILITIES:
Payable to affiliates $ 56,781 $ 33,048
Accounts payable and accrued liabilities 575,956 582,598
Distributions payable to partners -- 310,992
----------- -----------
Total liabilities 632,737 926,638
----------- -----------
COMMITMENTS AND CONTINGENCIES
NET ASSETS:
Managing General Partner (196,777) (196,777)
Limited Partners (equivalent to $1.19
and $1.26, respectively, per limited
partnership unit based on 1,026,273
units outstanding) 1,226,121 1,295,208
----------- -----------
Net assets 1,029,344 1,098,431
----------- -----------
Total liabilities and net assets $ 1,662,081 $ 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 MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 66,625 $ 99,690
--------- ---------
Total investment income 66,625 99,690
--------- ---------
Expenses:
Fund administration fees 35,843 35,843
Investment advisory fees 22,451 24,275
Professional fees 21,640 13,113
Administrative expenses 20,276 20,276
Independent General Partner fees
and expenses 12,330 24,943
Other expenses 23,172 19,424
--------- ---------
Total expenses 135,712 137,874
--------- ---------
NET INVESTMENT LOSS (69,087) (38,184)
NET CHANGE IN UNREALIZED
LOSS ON INVESTMENTS -- 874
--------- ---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (69,087) $ (37,310)
========= =========
</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 CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (69,087) $ (37,310)
Adjustments to reconcile net decrease in net assets
resulting from operations to net cash (used in)
provided by operating activities:
Accreted discount on portfolio investments (13,037) --
Change in assets and liabilities:
Accrued interest receivable 1,492 35,758
Other assets 8,800 16,608
Payable to affiliates 23,733 10,919
Accounts payable and accrued liabilities (6,642) (3,472)
Net change in unrealized loss
on investments -- (874)
--------- ---------
Net cash (used in) provided by operating activities (54,741) 21,629
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (210,703) (507,840)
Sale of temporary investments, net 649,689 497,322
--------- ---------
Net cash provided by (used in) investing activities 438,986 (10,518)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (310,992) (336,271)
--------- ---------
Net cash used in financing activities (310,992) (336,271)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 73,253 (325,160)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 218,111 837,202
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 291,364 $ 512,042
========= =========
</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 CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND FOR THE YEAR ENDED DECEMBER 31, 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment loss $ (69,087) $ (326,228)
Net realized loss on investments -- 493,358
Net change in unrealized loss on
investments -- (7,712,001)
------------ ------------
Net decrease in net assets resulting
from operations (69,087) (7,544,871)
Repurchase of limited partnership units -- (383,736)
Return of capital distributions -- (1,319,805)
------------ ------------
Total decrease in net assets (69,087) (9,248,412)
Net assets:
Beginning of period 1,098,431 10,346,843
------------ ------------
End of period (including no undistributed
net investment income) $ 1,029,344 $ 1,098,431
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Per Unit Data:
Investment income $ .06 $ .09
Expenses (.13) (.12)
------------- -------------
Net investment loss (.07) (.03)
Distributions declared to partners -- (.30)
------------- -------------
Net decrease in net asset value (.07) (.33)
Net asset value:
Beginning of period 1.26 9.51
------------- -------------
End of period $ 1.19 $ 9.18
============= =============
Ratios (annualized):
Ratio of expenses to average net assets 51.02% 5.43%
Ratio of net investment loss to average
net assets (25.98)% (1.50)%
Number of limited partnership units at end of period 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.
9
<PAGE> 10
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 2000 and the results of its
operations, changes in net assets and its cash flows for the period 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 $22,451 are payable to FCM for the three
months ended March 31, 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 $35,843 were
paid by the Fund for the three months ended March 31, 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 $20,276 for the three months ended March 31,
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 three months ended
March 31, 2000 totaled $12,330.
10
<PAGE> 11
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(unaudited)
5. COMMITMENTS AND CONTINGENCIES
During February 2000, the Fund agreed to purchase up to $111,502 of LMC
Corporation's Promissory Notes due August 7, 2000. $59,468 of this investment
was funded during February and March 2000.
11
<PAGE> 12
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 March 31, 2000, the Fund held portfolio investments in two Managed
Companies and two Non-Managed Companies, with an aggregate original cost of
approximately $11.7 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 129.7% of the
Fund's net assets.
As of March 31, 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 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.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed approximately $6.23 per Unit to the Limited
Partners, with the cash coming primarily from the liquidation of these
investments.
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 either mature or are prepaid by the respective portfolio
companies, and the remaining equity investments are sold or otherwise
liquidated.
12
<PAGE> 13
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 are payable on specified dates between May
21, 2000 and May 21, 2002.
During February 2000, the Fund agreed to purchase up to $111,502 of LMC's
Promissory Notes due August 7, 2000. $59,468 of this investment was funded
during February and March 2000.
Distributions payable to partners decreased from $310,992 at December 31, 1999
to zero at March 31, 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 March 31, 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.
Payables to affiliates increased $23,733 from $33,048 at December 31, 1999 to
$56,781 at March 31, 2000. Substantially all of this increase resulted from the
deferral of the payment of FCM's subordinated investment advisory fee for the
three months ended March 31, 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.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment loss was $69,087 for the three months ended March 31,
2000 as compared to a net investment loss of $38,184 for the corresponding
period of the prior year. Net investment loss per limited partnership unit
increased from $0.03 to $0.07 and the ratio of net investment loss to average
net assets increased from 1.50% to 25.98% for the three months ended March 31,
2000 as compared to the corresponding period of the prior year.
The net investment loss for the three months ended March 31, 2000 increased
primarily as a result of a decrease in investment income as compared to the
corresponding period of the prior year. The impact of the decrease in investment
income was partially offset by a small decrease in total expenses.
Investment income decreased $33,065, or 33.2%, for the three months ended March
31, 2000, as compared to the corresponding period of the prior year. This
decrease 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, 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 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.
13
<PAGE> 14
Total expenses decreased $2,162, or 1.6%, for the three months ended March 31,
2000, as compared to the corresponding period of the prior year. This decrease
resulted primarily from decreases in Independent General Partner fees and
expenses and, to a lesser extent, investment advisory fees. These decreases were
partially offset by increases in professional fees and other expenses incurred
in connection with the Fund's LMC investments.
Net Unrealized Gain (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.
As of December 31, 1999, the Fund had recorded $10,335,805 of unrealized loss on
investments. There were no changes to these unrealized losses on investments
during the three months ended March 31, 2000. The cumulative net unrealized loss
on investments as of March 31, 2000 consisted of the following components:
<TABLE>
<CAPTION>
Net Changes in
Unrealized Gain (Loss) Net Unrealized
During the Three Gain (Loss)
Months Ended Recorded As of
Portfolio Company March 31, 2000 March 31, 2000
- ------------------------------------ --------------------- --------------
<S> <C> <C>
LMC $ - $ (8,260,377)
RBM - (753,634)
WMI - (1,321,794)
------ ------------
$ - $(10,335,805)
====== ============
</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. While no meaningful purchase offers have been received to
date, LMC has consummated a consignment joint venture arrangement with respect
to its spare parts business. The majority of LMC's employees have been released.
14
<PAGE> 15
In an effort to preserve value and facilitate the possible sale of LMC's
business, the Fund's General Partners approved the purchase of up to $111,502 of
LMC's Promissory Notes due August 7, 2000. $59,468 of this investment was funded
during February and March 2000.
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 against the carrying values of the
Fund's LMC investment during 1999. Thus, as of March 31, 2000, the Fund's total
LMC investment had a net carrying value of $332,672, versus its cost of
$8,593,049.
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.
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
("13i"), 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 stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, 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 a positive EBITDA. Sales and cash flows for the quarter
ended January 31, 2000 were slightly below budget.
15
<PAGE> 16
RBM remains current with its interest payments and is currently in compliance
with all of its senior and subordinated loan covenants. Originally, our debt was
scheduled to be repaid over the three years ending May 2002. However, RBM will
not make the principal payment scheduled for May 2000 on the Fund's note,
because it is not permitted to do so under the terms of an Intercreditor and
Subordination Agreement ("Intercreditor Agreement"), between the Fund and RBM's
other creditors. This Intercreditor Agreement was a stipulated pre-condition to
RBM's debt restructuring, which occurred in late 1998.
13i's CEO has taken over as CEO of RBM. He has hired a number of new
professionals and appears to have stabilized the company. If this continues, the
Fund could possibly receive a partial principal payment in the second quarter of
2001, since the Intercreditor Agreement permits such payments, limited to 85% of
RBM's EBITDA. There is no assurance that any payments will be permitted and any
such payments are entirely dependent upon RBM's continued improved performance.
The Fund continues to urge a sale of the Company or a refinancing of the Fund's
debt, but has been unable to obtain the agreement of 13i.
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 WMI, a waste management company. Pursuant to the terms of the agreement, the
Fund is prohibited from selling its WMI common stock for 24 months. In addition,
the Fund granted the entity acquiring the Fund's Atlas securities a call on the
Fund's WMI common stock during the 24-month lock up period and a right of first
refusal thereafter. The call price is $11.25 per share.
The WMI common stock, which trades on the OTC Bulletin Board System ("WAST"),
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 WMI 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 WMI 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 WMI 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 WMI common stock is $0.02 per share and the current bid
price (April 28, 2000) is $0.195 per share.
Readiness for Year 2000
During 1999, FCM completed a review of the accounting and other information
systems that are currently being utilized by FCM and the Fund with regard to
Year 2000 issues. This review involved both actual tests of parts of the
information systems that were conducted by third party consultants and
representations received from various software vendors. As a result of this
review, FCM believed that all of these systems were Year 2000 compliant. All of
the costs associated with this review were paid by FCM.
16
<PAGE> 17
FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems were
Year 2000 compliant. These third parties represented that their information
systems were also Year 2000 compliant.
As a result of the above discussed review, Year 2000 issues were not expected to
have any material adverse effects on the Fund's results of operations or
financial condition. As of April 30, 2000, the Fund has incurred no Year 2000
related issues.
17
<PAGE> 18
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.
27.1 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during the first
quarter of the fiscal year ending December 31, 2000.
The Registrant did file a report on Form 8-K on May 2, 2000 to report
that LMC filed for Chapter 11 bankruptcy protection.
18
<PAGE> 19
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: May 12, 2000 By: /s/ Donald R. Jackson
---------------------------
Donald R. Jackson
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C> <C>
11.1 Statement of Computation of Net Investment
Income Per Limited Partnership Unit.
27.1 Financial Data Schedule.
</TABLE>
E-1
<PAGE> 1
Exhibit No. 11.1
Statement of Computation of Net
Investment Income Per Limited
Partnership Unit
<PAGE> 2
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net Investment Loss $ (69,087) $ (38,184)
Percentage Allocable to Limited Partners 100% 99%
----------- -----------
Net Investment Loss Allocable
to Limited Partners $ (69,087) $ (37,802)
=========== ===========
Weighted Average Number of Limited
Partnership Units Outstanding 1,026,273 1,109,694
=========== ===========
Net Investment Loss Per Limited
Partnership Unit $ (.07) $ (.03)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<INVESTMENTS-AT-COST> 11,670,557
<INVESTMENTS-AT-VALUE> 1,334,752
<RECEIVABLES> 20,432
<ASSETS-OTHER> 15,533
<OTHER-ITEMS-ASSETS> 291,364
<TOTAL-ASSETS> 1,662,081
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 632,737
<TOTAL-LIABILITIES> 632,737
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,026,273
<SHARES-COMMON-PRIOR> 1,026,273
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (10,335,805)
<NET-ASSETS> 1,029,344
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66,625
<OTHER-INCOME> 0
<EXPENSES-NET> 135,712
<NET-INVESTMENT-INCOME> (69,087)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> (69,087)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (69,087)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,451
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 135,712
<AVERAGE-NET-ASSETS> 1,063,888
<PER-SHARE-NAV-BEGIN> 1.26
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.19
<EXPENSE-RATIO> 51.02
</TABLE>
