<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, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17738
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Fiduciary Capital Pension Partners, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 86-0653603
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(State of organization) (I.R.S. Employer
Identification No.)
410 17th Street
Suite 400
Denver, Colorado 80202
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(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 Pension Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1999
<TABLE>
<CAPTION>
Table of Contents
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Page
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<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
March 31, 1999 3
Balance Sheets - March 31, 1999 and
December 31, 1998 5
Statements of Operations for the three months
ended March 31, 1999 and 1998 6
Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 7
Statements of Changes in Net Assets for the
three months ended March 31, 1999 and
for the year ended December 31, 1998 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 PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANAGED COMPANIES:
23,056 sh. KEMET Corporation,
Common Stock(1)* 07/11/91 $ 8,170 $ 264,424
- --------------------------------------------------------------------------------------------------------------------------
8,170 264,424 3.1%
- --------------------------------------------------------------------------------------------------------------------------
$1,632,960 LMC Corporation, 12.00%
Senior Subordinated 11/01/96
Revolving Notes through
due 10/31/00 01/13/99 1,632,960 1,632,960
$346,800 LMC Corporation, 12.00%
Senior Subordinated 02/11/99
Revolving Notes through
due 10/1/99 (Note 5) 03/01/99 346,800 346,800
239,600 sh. LMC Corporation, 7.00%
Cumulative Redeemable
Preferred Stock* 06/10/94 2,389,210 2,389,210
4,476,500 sh. LMC Corporation, 02/09/96
Common Stock* through
08/05/98 2,465,449 1,723,529
47.92 sh. LMC Credit Corp.,
Common Stock* 02/09/96 1 1
- --------------------------------------------------------------------------------------------------------------------------
6,834,420 6,092,500 72.1
- --------------------------------------------------------------------------------------------------------------------------
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(2) 05/24/95 1,237,587 645,000
12,603.7 sh. R.B.M. Precision Metal
Products, Inc., Warrants to
Purchase Common Stock* 05/24/95 73,295 1
12,717 sh. R.B.M. Precision Metal
Products, Inc., Common
Stock * 12/09/98 1 1
- --------------------------------------------------------------------------------------------------------------------------
1,310,883 645,002 7.7
- --------------------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (86.0% of net assets) 8,153,473 7,001,926 82.9
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this Schedule.
3
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1999
(unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NON-MANAGED COMPANY:
821,376 sh. WasteMasters, Inc.,
Common Stock(3)* 06/03/98 1,097,307 1
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment in Non-Managed Company (0.0% of net assets) 1,097,307 1 0.0
- ---------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$1,450,000 American Express Credit Corp.,
4.61% Notes due 4/5/99 03/22/99 1,449,259 1,449,259
- ---------------------------------------------------------------------------------------------------------------------------
Total Temporary Investments (17.8% of net assets) 1,449,259 1,449,259 17.1
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (103.8% of net assets) $ 10,700,039 $8,451,186 100.0%
===========================================================================================================================
</TABLE>
(1) The KEMET Corporation common stock trades on the NASDAQ National Market
System.
(2) The notes will amortize in three equal annual installments of $430,000
commencing on May 24, 2000.
(3) The WasteMasters, Inc. common stock, which trades on the NASDAQ Small
Cap Market System, is subject to a 24 month lock up period, 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 PENSION PARTNERS, L.P.
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
ASSETS:
Investments:
Portfolio investments, at value:
Managed companies (amortized cost -
$8,153,473 and $7,761,313,
respectively) $ 7,001,926 $ 6,609,045
Non-managed company (amortized cost -
$1,097,307) 1 1
Temporary investments, at amortized cost 1,449,259 1,897,223
----------- -----------
Total investments 8,451,186 8,506,269
Cash and cash equivalents 411,757 628,670
Accrued interest receivable 55,934 85,556
Other assets 12,596 27,234
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Total assets $ 8,931,473 $ 9,247,729
=========== ===========
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 34,197 $ 25,748
Accounts payable and accrued liabilities 468,698 470,840
Distributions payable to partners 284,950 284,950
----------- -----------
Total liabilities 787,845 781,538
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COMMITMENTS AND CONTINGENCIES (Note 5)
NET ASSETS:
Managing General Partner (180,012) (180,012)
Limited Partners (equivalent to $8.85
and $9.19 respectively, per limited
partnership unit based on 940,336
units outstanding) 8,323,640 8,646,203
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Net assets 8,143,628 8,466,191
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Total liabilities and net assets $ 8,931,473 $ 9,247,729
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
5
<PAGE> 6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 79,495 $ 204,108
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Total investment income 79,495 204,108
--------- ---------
Expenses:
Fund administration fees (Note 3) 29,582 29,582
Independent General Partner fees
and expenses (Note 4) 21,213 18,095
Investment advisory fees (Note 2) 20,741 30,388
Administrative expenses (Note 3) 17,224 17,224
Professional fees 11,583 76,155
Other expenses 17,486 18,199
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Total expenses 117,829 189,643
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NET INVESTMENT (LOSS) INCOME (38,334) 14,465
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REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments -- (11,119)
Net change in unrealized loss
on investments 721 (152,514)
--------- ---------
Net gain (loss) on investments 721 (163,633)
--------- ---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (37,613) $(149,168)
========= =========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
6
<PAGE> 7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $ (37,613) $ (149,168)
Adjustments to reconcile net decrease in net assets
resulting from operations to net cash provided by
operating activities:
Accreted discount on portfolio investments -- (4,153)
Change in assets and liabilities:
Accrued interest receivable 29,622 (3,678)
Other assets 14,638 6,313
Payable to affiliates 8,449 30,157
Accounts payable and accrued liabilities (2,142) 28,340
Net realized loss on investments -- 11,119
Net change in unrealized loss
on investments (721) 152,514
----------- -----------
Net cash provided by operating activities 12,233 71,444
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (392,160) (449,000)
Sale of temporary investments, net 447,964 1,407,896
----------- -----------
Net cash provided by investing activities 55,804 958,896
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (284,950) (1,030,446)
----------- -----------
Net cash used in financing activities (284,950) (1,030,446)
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (216,913) (106)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 628,670 276,108
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 411,757 $ 276,002
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
7
<PAGE> 8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND FOR THE YEAR ENDED DECEMBER 31, 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Increase in net assets from operations:
Net investment (loss) income $ (38,334) $ 57,840
Net realized loss on investment -- (2,497,650)
Net change in unrealized loss on
investments 721 1,552,695
------------ ------------
Net decrease in net assets
resulting from operations (37,613) (887,115)
Repurchase of limited partnership units -- (752,571)
Distributions to partners from -
Net investment income -- (85,585)
Realized gain on investments -- (1,402,287)
Return of capital (284,950) (1,270,116)
------------ ------------
Total decrease in net assets (322,563) (4,397,674)
Net assets:
Beginning of period 8,466,191 12,863,865
------------ ------------
End of period (including no undistributed
net investment income) $ 8,143,628 $ 8,466,191
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Per Unit Data:
Investment income $ .09 $ .20
Expenses (.13) (.19)
------------- -------------
Net investment (loss) income (.04) .01
Net realized loss on investments -- (.01)
Net change in unrealized loss on
investments -- (.15)
Distributions declared to partners (.30) (1.10)
------------- -------------
Net decrease in net asset value (.34) (1.25)
Net asset value:
Beginning of period 9.19 12.66
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End of period $ 8.85 $ 11.41
============= =============
Ratios (annualized):
Ratio of expenses to average net assets 5.68% 6.21%
Ratio of net investment (loss) income to
average net assets (1.85)% 0.47%
Number of limited partnership units at end of period 940,336 1,020,142
</TABLE>
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
9
<PAGE> 10
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(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 Pension Partners, L.P. (the "Fund"), necessary to
fairly present the financial position of the Fund as of March 31, 1999 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,
1998.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM receives 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
$20,741 were paid by the Fund for the three months ended March 31, 1999.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of .45% of net proceeds available for investment, as
defined in the Partnership Agreement. Fund administration fees of $29,582 were
paid by the Fund for the three months ended March 31, 1999. 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 $17,224 for the three months
ended March 31, 1999.
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 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, 1999 totaled $21,213.
10
<PAGE> 11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(unaudited)
5. COMMITMENTS AND CONTENGENCIES
LMC Commitment LMC is entitled to draw down a total of $650,250 pursuant to the
terms of the Senior Subordinated Revolving Notes due October 1, 1999, which are
held by the Fund. As of March 31, 1999, LMC had drawn down $346,800. An
additional $52,020 was drawn down during May 1999.
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, 1999, the Fund held portfolio investments in three Managed
Companies and one Non-Managed Company, with an aggregate original cost of
approximately $9.3 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 86.0% of the
Fund's net assets. When acquired, these portfolio investments generally
consisted of high-yield subordinated debt, linked with an equity participation
or a comparable participation feature in middle market companies. These
securities were typically issued in private placement transactions and were
subject to certain restrictions on transfer or sale, thereby limiting their
liquidity. A number of the portfolio companies have prepaid their subordinated
debt that the Fund held. In addition, three of the portfolio companies have
successfully completed initial public offerings ("IPOs") of their stock. The
Fund has sold the stock it held in these three companies, except for a portion
of its KEMET Corporation ("KEMET") stock.
As of March 31, 1999, the Fund's remaining assets were invested in short-term
commercial paper. 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.
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 $5.33 per Unit to the Limited
Partners, with the cash coming primarily from the liquidation of these
investments. The Fund presently has only four remaining investments in
portfolio companies, which are expected to generate only limited amounts of
interest income for the Fund during 1999 and future years.
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.
12
<PAGE> 13
As a result of the liquidation of a major portion of the Fund's investments,
the Fund is not expected to have sufficient liquidity to continue to (i) fund
quarterly cash distributions, (ii) fund the annual repurchase offer, and (iii)
pay its operating expenses. Accordingly, the General Partners are presently
considering a number of alternative actions through which the Fund could be
liquidated during 1999 or 2000. Once a plan of liquidation is adopted, the
General Partners will follow the requisite regulatory procedures required to
liquidate the Fund. These procedures are expected to include requesting Limited
Partner approval of the liquidation plan through a proxy solicitation, which
should commence in July.
During February 1999, the Fund agreed to purchase $650,250 of LMC's Senior
Subordinated Revolving Notes due October 1, 1999. $346,800 of this investment
was funded during February and March 1999.
Accrued interest receivable decreased $29,622 from $85,556 at December 31, 1998
to $55,934 at March 31, 1999. This decrease resulted primarily from the fact
that the quarterly interest payment that was due on the LMC Corporation ("LMC")
notes on October 1, 1998 was not received by the Fund until January 1999. The
impact of the past due status of this LMC interest payment at December 31, 1998
was partially offset by interest income earned during the three months ended
March 31, 1999 on the LMC follow-on investments that were acquired during 1998
and 1999.
Other assets decreased $14,638 from $27,234 at December 31, 1998 to $12,596 at
March 31, 1999. This decrease resulted from decreases in both prepaid insurance
and deposits.
During the three months ended March 31, 1999, the Fund paid a cash distribution
pertaining to the fourth quarter of 1998, in the amount of $284,950, or $0.30
per Unit. The distribution for the first quarter of 1999 will be paid on May
14, 1999 at a rate of $0.30 per Unit for all Limited Partners. The Fund
currently expects to make a $0.30 per Unit distribution for the second quarter
on or about August 13, 1999. The Fund's ability to continue to pay quarterly
distributions after the second quarter of 1999 is uncertain at this time. The
distribution question will be addressed on a quarterly basis, and will involve
the consideration of a number of issues, including the status of the proposed
proxy vote. A significant portion of the 1999 distributions are expected to
constitute a return of capital.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment loss was $(38,334) for the three months ended March
31, 1999 as compared to net investment income of $14,465 for the corresponding
period of the prior year. Net investment (loss) income per limited partnership
unit decreased from $.01 to $(.04) and the ratio of net investment (loss)
income to average net assets decreased from 0.47% to (1.85)% for the three
months ended March 31, 1999 as compared to the corresponding period of the
prior year.
Net investment income for the three months ended March 31, 1999 decreased
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 decrease in total expenses.
Investment income decreased $124,613, or 61.1%, for the three months ended
March 31, 1999, 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 RBM Precision Metal Products, Inc. ("RBM")
13
<PAGE> 14
subordinated debt investment effective during August 1998 and a decrease in the
amount of the Fund's temporary investment. The amount of the Fund's temporary
investments decreased because of, (i) the significant distributions made by the
Fund during 1998 and the Fund during 1998, (ii) purchases of additional LMC
follow-on investments, (iii) the Fund's repurchase of 7.82% of its Units during
the fourth quarter of 1998. The negative effect of these items was partially
offset by an increase in interest income earned on the LMC follow-on
investments that were acquired during 1998 and 1999.
Total expenses decreased $71,814, or 37.9%, for the three months ended March
31, 1999, as compared to the corresponding period of the prior year. This
decrease resulted primarily from decreases in professional fees and investment
advisory fees. These decreases were partially offset by smaller increases in
Independent General Partner fees and expenses and other expenses.
Professional fees decreased during the three months ended March 31, 1999 as
compared to the corresponding period of the prior year, primarily because of
fees incurred during the prior year in connection with the LMC related
litigation.
The investment advisory fees decreased during the three months ended March 31,
1999 as compared to the corresponding period of the prior year, primarily as a
result of (i) the repurchase of Units during the fourth quarter of 1998, (ii)
the payment of quarterly cash distributions during 1998 that exceeded the
Limited Partners' Preferred Returns (as defined in the Fund's Partnership
Agreement), and (iii) losses realized by the Fund during the second quarter of
1998 with respect to the Mobile Technology, Inc., Atlas Environmental, Inc.
("Atlas") and AR Accessories Group, Inc. portfolio investments. All three of
these items decreased the amount of the Fund's available capital (as defined in
the Partnership Agreement), which is the base with respect to which the
investment advisory fees are calculated.
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, 1998, the Fund had recorded $255,533 of unrealized gain and
$2,505,107 of unrealized loss on investments. Therefore, as of December 31,
1998, the Fund had recorded a total net unrealized loss on investments of
$2,249,574.
14
<PAGE> 15
The decrease in unrealized loss on investments during the three months ended
March 31, 1999 and the cumulative net unrealized loss on investments as of
March 31, 1999 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, 1999 March 31, 1999
- ------------------------------------ --------------------- ---------------
<S> <C> <C>
KEMET $721 $ 256,254
LMC -- (741,920)
RBM -- (665,881)
WMI -- (1,097,306)
---- ------------
$721 $ (2,248,853)
==== ============
</TABLE>
KEMET completed an IPO of its common stock during 1992. The stock, which trades
on the NASDAQ National Market System, closed at 11.46875 (an average of the
closing bid and ask prices) on March 31, 1999. This price is up slightly from
the closing price of $11.4375 on December 31, 1998. Based on the $11.46875
closing trading price of the common stock, the 23,056 shares of common stock
that the Fund held at March 31, 1999 had a market value of $264,424.
LMC experienced significant operating problems after the Fund acquired its LMC
investment during 1994 and the Fund was involved in a restructuring of its LMC
investment during 1995. In the restructuring, the Fund's existing LMC
subordinated debt and warrants were converted into preferred stock and the Fund
purchased $454,400 of new common stock. As a result of LMC's operational
difficulties and the fact that the Fund's investment was converted from debt
securities to equity securities, the Fund wrote its LMC investment down by
$459,200 during 1995.
LMC has a defined contribution plan (the "Plan"), which was closed during 1995.
The current and previous trustees of the Plan failed to assure that the Plan
was properly funded. In order to rectify this problem, LMC has made demands on
the current and previous trustees of the Plan and the previous controlling
shareholders that these parties make the necessary payments to the Plan. LMC
has filed suit against the current trustee, whose wholly-owned company
currently owns approximately 9% of LMC's common stock, and expects to prevail
in this litigation, although there can be no assurance that this will be the
case.
The Internal Revenue Service ("IRS") performed an audit on the Plan during
1998, in which it reviewed certain of the years with respect to which the Plan
was not properly funded. At the conclusion of their audit, the IRS notified LMC
that it had determined the underfunding for the years reviewed to be $243,385.
The IRS also imposed a penalty of $12,362, which LMC has paid. LMC is currently
in discussions with the IRS concerning how and when the $243,385 assessment,
and the related interest, must be paid. If LMC is required to make the payments
prior to of the litigation with the current trustee of the Plan, it will have a
negative impact on LMC's working capital availability. In addition, it is
possible that additional assessments could be made in the future for
underfundings of the Plan with respect to earlier years.
As a result of this matter and its potential impact on LMC, the Fund recorded
an additional $282,720 write down in the value of its LMC investment during
1997. On a cumulative basis, as of March 31, 1999, the Fund's LMC investment
has been written down in value by $741,920. The
15
<PAGE> 16
Fund and LMC's other stockholders made follow-on investments in LMC during
1996, 1997, 1998 and 1999 in order to provide LMC with working capital required
to fund significant continuing operating losses, develop a new product, finance
the downpayment on and move to a new facility and to purchase capital equipment
needed to modernize the company's production operations.
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 has been 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, Norwest Business Credit, replaced Bank of America. As part
of this transaction, RBM's equity sponsor 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 $665,881 relating to RBM during the year ended December
31, 1998.
During June 1998, the Fund exchanged its Atlas (which was in bankruptcy
proceedings) subordinated notes and warrants for 821,376 shares of common stock
of WasteMasters, Inc. ("WMI"), an Atlanta, Georgia based 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 NASDAQ Small Cap Market System
("WASTE"), closed at $1.78 and $0.36 (an average of the closing bid and ask
prices) on June 3, 1998 and March 31, 1999, respectively. Based on these
prices, the Fund's WMI had trading values of $1,462,049 on the date of the
exchange (June 3, 1998) and $295,695 on March 31, 1999. 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 has decided to carry the WMI stock at the same
nominal value that the Atlas securities were previously carried by the Fund.
The 52-week low for the WMI common stock is $0.12 per share.
The Fund recorded a realized loss of $2,125,574 on the exchange, which is equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,097,306 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.
16
<PAGE> 17
FCM continually monitors both the Fund's portfolio companies and the markets,
and continually evaluates the decision to hold or sell its traded securities.
Readiness for Year 2000
FCM has 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. FCM believes that all of these systems
are Year 2000 compliant. All of the costs associated with this review were paid
by FCM.
FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems are
Year 2000 compliant. These third parties have represented that their
information systems are either currently Year 2000 compliant or that they have
identified the scope of required upgrades or changes to their information
systems that are needed and that they have a plan in place to complete these
upgrades on a timely basis.
As a result of the above discussed review, Year 2000 issues are not expected to
have any material adverse effects on the Fund's results of operations or
financial condition.
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, 1999.
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 Pension Partners, L.P.
(Registrant)
By: FCM Fiduciary Capital Management Company
Managing General Partner
Date: May 12, 1999 By: /s/ Donald R. Jackson
----------------------------------------
Donald R. Jackson
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ---------- ----------- ----
<S> <C> <C>
11.1 Statement of Computation of Net Investment
Income Per Limited Partnership Unit.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit No. 11.1
----------------
Statement of Computation of Net
-------------------------------
Investment Income Per Limited
-----------------------------
Partnership Unit
----------------
<PAGE> 2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net Investment (Loss) Income $ (38,334) $ 14,465
Percentage Allocable to Limited Partners 108% 99%
---------- ----------
Net Investment (Loss) Income Allocable
to Limited Partners $ (41,401) $ 14,320
========== ==========
Weighted Average Number of Limited
Partnership Units Outstanding 940,336 1,020,142
========== ==========
Net Investment (Loss) Income Per Limited
Partnership Unit $ (.04) $ . 01
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 10,700,039
<INVESTMENTS-AT-VALUE> 8,451,186
<RECEIVABLES> 55,934
<ASSETS-OTHER> 12,596
<OTHER-ITEMS-ASSETS> 411,757
<TOTAL-ASSETS> 8,931,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 787,845
<TOTAL-LIABILITIES> 787,845
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 940,336
<SHARES-COMMON-PRIOR> 940,336
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,248,853)
<NET-ASSETS> 8,143,628
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 79,495
<OTHER-INCOME> 0
<EXPENSES-NET> 117,829
<NET-INVESTMENT-INCOME> (38,334)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 721
<NET-CHANGE-FROM-OPS> (37,613)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 284,950
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (322,563)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,741
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 117,829
<AVERAGE-NET-ASSETS> 8,304,910
<PER-SHARE-NAV-BEGIN> 9.19
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .30
<PER-SHARE-NAV-END> 8.85
<EXPENSE-RATIO> 5.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
