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 fiscal period ended March 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-17526
EQUUS CAPITAL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0264305
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2929 Allen Parkway, Suite 2500
HOUSTON, TEXAS 77019-2120
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (713) 529-0900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERS' INTERESTS
(Title of Class)
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 [ ]
As of March 31, 1995, 12,278 units ("Units") of limited partners' interests in
the Partnership were held by non-affiliates of the registrant. The net asset
value of a Unit at March 31, 1995 was $809.39. There is no established market
for such Units.
Documents incorporated by reference: None.
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
(A Delaware Limited Partnership)
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Assets, Liabilities and Partners' Capital
- March 31, 1995 and December 31, 1994................... 1
Statements of Operations
- For the three months ended March 31, 1995 and 1994..... 2
Statements of Changes in Partners' Capital
- For the three months ended March 31, 1995.............. 3
- For the three months ended March 31, 1994.............. 4
Statements of Cash Flows
- For the three months ended March 31, 1995 and 1994..... 5
Selected Per Unit Data and Ratios
- For the three months ended March 31, 1995 and 1994..... 7
Schedule of Enhanced Yield Investments
- March 31, 1995........................................ 8
Notes to Financial Statements......................... 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 17
SIGNATURE............................................................... 17
-ii-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
1995 1994
----------- -----------
ASSETS
Enhanced yield investments, at fair
value (cost of $10,870,971 and $10,716,507,
respectively) ............................... $11,562,558 $11,876,797
Temporary cash investments, at cost
which approximates fair value ............... 62,998 13,589
Cash .......................................... 27,174 5,676
Accrued interest receivable ................... 75,166 80,060
----------- -----------
Total assets ........................ $11,727,896 $11,976,122
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable ............................ $ 36,124 $ 44,050
Due to management company ................... 1,760 --
Note payable ................................ 1,600,000 1,300,000
----------- -----------
Total liabilities ................... 1,637,884 1,344,050
----------- -----------
Commitments and contingencies
Partners' capital:
Managing partner ............................ 123,449 128,870
Independent general partners ................ 2,973 3,127
Limited partners (12,310 Units
issued and outstanding) ................... 9,963,590 10,500,075
----------- -----------
Total partners' capital ............. 10,090,012 10,632,072
----------- -----------
Total liabilities and
partners' capital ................... $11,727,896 $11,976,122
=========== ===========
The accompanying notes are an
integral part of these financial statements.
-1-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
1995 1994
----------- -----------
Investment income:
Income from enhanced yield investments ...... $ 51,139 $ 68,394
Interest from temporary cash investments .... 315 4,063
----------- -----------
Total investment income ................... 51,454 72,457
----------- -----------
Expenses:
Management fee .............................. 59,113 65,261
Deferred incentive fee ...................... -- (235,494)
Interest expense ............................ 29,657 7,500
Independent general partner fees ............ 15,750 14,250
Mailing and printing expenses ............... 11,525 8,566
Administrative fees ......................... 5,280 5,295
Professional fees ........................... 3,486 7,559
----------- -----------
Total expenses ............................ 124,811 (127,063)
----------- -----------
Net investment income (loss) .................. (73,357) 199,520
----------- -----------
Unrealized appreciation of enhanced
yield investments:
End of period ............................... 691,587 1,569,229
Beginning of period ......................... 1,160,290 2,065,781
----------- -----------
Decrease in unrealized appreciation ....... (468,703) (496,552)
----------- -----------
Total decrease in partners'
capital from operations ................. $ (542,060) $ (297,032)
=========== ===========
The accompanying notes are an
integral part of these financial statements.
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<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
INDEPENDENT
MANAGING GENERAL LIMITED
TOTAL PARTNER PARTNERS PARTNERS
------------ --------- ----------- ------------
Partners' capital,
December 31, 1994 ..... $ 10,632,072 $ 128,870 $ 3,127 $ 10,500,075
------------ --------- ------- ------------
Investment activities:
Investment income ..... 51,454 514 14 50,926
Expenses .............. 124,811 1,248 35 123,528
------------ --------- ------- ------------
Net investment loss.. (73,357) (734) (21) (72,602)
Decrease in unrealized
appreciation of
enhanced yield
investments ........... (468,703) (4,687) (133) (463,883)
------------ --------- ------- ------------
Net decrease in
partners' capital ..... (542,060) (5,421) (154) (536,485)
------------ --------- ------- ------------
Partners' capital,
March 31, 1995 ........ $ 10,090,012 $ 123,449 $ 2,973 $ 9,963,590
============ ========= ======= ============
The accompanying notes are an
integral part of these financial statements.
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<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)
<TABLE>
<CAPTAION>
INDEPENDENT
MANAGING GENERAL LIMITED
TOTAL PARTNER PARTNERS PARTNERS
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Partners' capital,
December 31, 1993 ............................ $ 11,638,278 $ 146,332 $ 3,411 $ 11,488,535
------------ --------- ------- ------------
Investment activities:
Investment income ............................ 72,457 724 20 71,713
Expenses ..................................... (127,063) (1,271) (36) (125,756)
------------ --------- ------- ------------
Net investment income ...................... 199,520 1,995 56 197,469
Decrease in unrealized appre-
ciation of enhanced
yield investments ............................ (496,552) (12,365) (139) (484,048)
------------ --------- ------- ------------
Net decrease in partners'
Capital ...................................... (297,032) (10,370) (83) (286,579)
------------ --------- ------- ------------
Partners' capital,
March 31, 1994 ............................... $ 11,341,246 $ 135,962 $ 3,328 $ 11,201,956
============ ========= ======= ============
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-4-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
1995 1994
--------- ---------
Cash flows from operating activities:
Interest and dividends received ............. $ 56,348 $ 47,413
Cash paid to management company,
general partners and suppliers ............ (130,977) (133,589)
--------- ---------
Net cash used by operating activities ..... (74,629) (86,176)
--------- ---------
Cash flows from investing activities:
Purchases of enhanced yield investments ..... (275,000) (119,000)
Repayments of enhanced yield investments .... 120,536 24,900
--------- ---------
Net cash used by investing activities ..... (154,464) (94,100)
--------- ---------
Cash flows from financing activities:
Advances from bank ................................. 331,500 --
Repayments to bank ................................. (31,500) --
--------- ---------
Net cash provided by financing activities ........ 300,000 --
--------- ---------
Net increase (decrease) in cash and cash equivalents . 70,907 (180,276)
Cash and cash equivalents at
beginning of period ......................... 19,265 594,839
--------- ---------
Cash and cash equivalents at end
of period ................................... $ 90,172 $ 414,563
========= =========
The accompanying notes are an
integral part of these financial statements.
-5-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
(CONTINUED)
1995 1994
--------- ---------
Reconciliation of decrease in partners'
capital from operations to net cash used
by operating activities:
Decrease in partners' capital from operations ..... $(542,060) $(297,032)
Adjustments to reconcile decrease in
partners' capital from operations to
net cash used by operating activities:
Decrease in unrealized appreciation
of enhanced yield investments ......... 468,703 496,552
Decrease (increase) in accrued
interest receivable ................... 4,894
Decrease in accounts payable ........... (7,926) (25,158)
Increase in due to management company .. 1,760 --
Decrease in deferred incentive fee ..... -- (235,494)
--------- ---------
Net cash used by operating activities ............. $ (74,629) $ (86,176)
========= =========
The accompanying notes are an
integral part of these financial statements.
-6-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
1995 1994
------- -------
Investment income .................................. $ 4.14 $ 5.83
Expenses ........................................... 10.04 (10.21)
------- -------
Net investment income (loss) ....................... (5.90) 16.04
Decrease in unrealized appreciation
of enhanced yield investments ................... (37.68) (39.32)
------- -------
Net decrease in partners' capital from
operations ...................................... (43.58) (23.28)
Partners' capital, beginning of period ............. 852.97 933.27
------- -------
Partners' capital, end of period ................... $809.39 $909.99
======= =======
Ratio of expenses to average partners' capital ..... 1.21% (1.11)%
Ratio of net investment income (loss) to average
partners' capital ............................... (0.71)% 1.74%
Ratio of total decrease in partners' capital
from operations to average partners' capital .... (5.24)% (2.53)%
The accompanying notes are an
integral part of these financial statements.
-7-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
SCHEDULE OF ENHANCED YIELD INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DATE OF
PORTFOLIO COMPANY INITIAL INVESTMENT COST FAIR VALUE
----------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Artegraft, Inc. January 1993
- 12% senior term promissory note,
due 1994-1997 .................................................... $ 325,700 $ 325,700
- 12% junior term promissory note,
due 1997 ......................................................... 250,000 250,000
- Warrant to buy up to 1,000 shares of
common stock at $.01 per share
through December 31, 2002 ........................................ 10 63,325
- Warrant to buy up to 4,000 shares
of common stock at $25 per share
through December 31, 2002 ........................................ 40 186,675
Champion Healthcare Corporation (AMEX-CHC) April 1991
- 52,752 shares of common stock .................................... 46,463 342,888
- 831,177 shares of Series A convertible
preferred stock .................................................. 831,177 1,415,109
- 10,538 shares of Series B convertible
preferred stock .................................................. 124,356 137,000
- 1,300 shares of Series C convertible
preferred stock .................................................. 23,400 23,400
- Warrants to buy up to 1,894 shares of
common stock at $5.90 through June 1999 .......................... -- 1,136
CMC Holdings, Inc. November 1992
- 74,000 shares of common stock .................................... 74,000 --
- 148,000 shares of Series A cumulative
preferred stock .................................................. 148,000 --
- 11% subordinated debentures, due 1997-1999 ....................... 1,776,000 999,000
- 12% promissory note, due 1997-1999 ............................... 400,000 400,000
Drypers Corporation (NASDAQ-DYPR) July 1991
- 224,344 shares of common stock ................................... 1,309,000 1,637,712
- Warrants to buy up to 1,357
shares of common stock at $4
per share through June 30, 1998 .................................. -- 4,478
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-8-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
SCHEDULE OF ENHANCED YIELD INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
DATE OF
PORTFOLIO COMPANY INITIAL INVESTMENT COST FAIR VALUE
----------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Garden Ridge Corporation (NASDAQ-GRDG) July 1992
- 69,187 shares of common stock .................................... $ 100,029 $ 553,500
- 14,802 shares of 8% cumulative
preferred stock .................................................. 88,812 88,812
- Prime + 3%, minimum 9.5%
subordinated notes, due 1998-2002 ................................ 363,233 363,233
- 12% senior subordinated note, due 1998-2000 ...................... 166,680 166,680
- Warrants to buy up to 7,501 shares of
common stock at $6.67 per share through
December 15, 2003 ................................................ -- 10,002
Independent Gas Company Holdings, Inc. February 1991
- 14,962 shares of common stock .................................... 20,447 20,447
- 1,281 shares of 9% Series A preferred stock ...................... 1,284,530 1,284,530
- 170 shares of Series C preferred stock ........................... 170,000 170,000
- 10% bridge loan due 1995 ......................................... 45,100 45,100
Industrial Equipment Rentals, Inc. June 1993
- 91,115 shares of common stock .................................... 911 911
- 2,685 shares of 6% cumulative junior
preferred stock .................................................. 268,500 268,500
- 12% subordinated debenture, due 2003 ............................. 538,889 538,889
Maxim Engineers, Inc. March 1991
- 15,531 shares of common stock .................................... 15,531 65,531
- 1,500,000 shares of 10% cumula-
tive, convertible preferred stock ................................ 1,500,000 1,950,000
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-9-
<PAGE>
EQUUS CAPITAL PARTNERS, L.P.
SCHEDULE OF ENHANCED YIELD INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
DATE OF
PORTFOLIO COMPANY INITIAL INVESTMENT COST FAIR VALUE
----------------- ------------------ ----------- -----------
<S> <C> <C> <C>
Medifit of America, Inc. September 1992
- 190,476 shares of Series D preferred
stock ........................................................... $ 1,000,000 $ 250,000
- Warrant to buy up to 9,054 shares
of common stock at $3.75 per share
through January 1, 1998 .......................................... 163 --
- Warrant to buy up to 76,379 shares
of common stock at $.01 per share
through January 1, 1998 .......................................... -- --
----------- -----------
Total .......................................................... $10,870,971 $11,562,558
=========== ===========
</TABLE>
All of the Partnership's Enhanced Yield Investments are restricted from
public sale without prior registration under the Securities Act of 1933. The
Partnership negotiates certain aspects of the method and timing of the
disposition of the Partnership's Enhanced Yield Investments in each portfolio
company, including registration rights and related costs. In connection with the
investments in Champion Healthcare Corporation, CMC Holdings, Inc., Independent
Gas Company Holdings, Inc., Industrial Equipment Rentals, Inc., Maxim Engineers,
Inc. and Medifit of America, Inc., rights have been obtained to demand the
registration of such securities under the Securities Act of 1933, providing
certain conditions are met. The Partnership does not expect to incur significant
costs, including costs of any such registration, in connection with the future
disposition of its portfolio securities.
As defined in the Investment Company Act of 1940, the Partnership is
considered to have controlling interest in CMC Holdings, Inc., Industrial
Equipment Rentals, Inc. and Maxim Engineers, Inc. The fair value of the
Partnership's investments in Champion Healthcare Corporation and Drypers
Corporation include discounts from the closing market price of $476,827 and
$411,904 to reflect the effects of restrictions on the sale of such securities
at March 31, 1995. Income was earned in the amount of $20,178 and $51,087 for
the three months ended March 31, 1995, and 1994, respectively, on Enhanced Yield
Investments of companies in which the Partnership has a controlling interest.
The accompanying notes are an
integral part of these financial statements.
-10-
EQUUS CAPITAL PARTNERS, L.P.
SCHEDULE OF ENHANCED YIELD INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
(CONTINUED)
As defined in the Investment Company Act of 1940, all of the Partnership's
investments are in eligible Enhanced Yield Investments. The Partnership provides
significant managerial assistance to all of the Portfolio Companies in which it
has invested except Artegraft, Inc. and Medifit of America, Inc. The Partnership
provides significant managerial assistance to Portfolio Companies that comprise
90% of the total value of the Enhanced Yield Investments.
The accompanying notes are an
integral part of these financial statements.
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EQUUS CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(UNAUDITED)
(1) ORGANIZATION AND BUSINESS PURPOSE
Equus Capital Partners, L.P. (the "Partnership"), a Delaware limited
partnership, completed the sale of 12,310 units of limited partners' interest
("Units") to 1,428 limited partners as of December 31, 1990. Each Unit required
a capital contribution to the Partnership of $1,000 less applicable selling
commission discounts and may not be sold, transferred or assigned without the
consent of Equus Capital Corporation, a Delaware corporation (the "Managing
Partner"), which consent may not be unreasonably withheld. Subscriptions for
Units were first accepted at the initial closing on October 6, 1989, and
subsequent quarterly closings were held through the final closing effective
December 31, 1990.
The Partnership seeks to achieve current income and capital appreciation
principally by making investments in securities consisting primarily of
subordinated debt and related equity securities issued by companies to raise
capital or in connection with leveraged buyouts or recapitalizations ("Enhanced
Yield Investments"). The Partnership has elected to be treated as a business
development company under the Investment Company Act of 1940, as amended. The
Partnership will terminate no later than December 31, 1999, subject to the right
of the Independent General Partners to extend the term for up to four additional
years if they determine that such extension is in the best interest of the
Partnership.
(2) MANAGEMENT
The Partnership has four general partners, consisting of the Managing
Partner and three independent, individual general partners (the "Independent
General Partners"). As compensation for services rendered to the Partnership,
each Independent General Partner receives an annual fee of $15,000 and a fee of
$1,500 for each meeting of the Independent General Partners attended. Pursuant
to the Partnership agreement, the Managing Partner has made a general partner's
capital contribution to the Partnership of $125,316, or approximately one
percent of the Partnership's contributed capital, and each Independent General
Partner has made a capital contribution of $1,000.
The Partnership has entered into a management agreement with Equus Capital
Management Corporation, a Delaware corporation (the "Management Company").
Pursuant to such agreement, the Management Company performs certain management
and administrative services necessary for the operation of the Partnership. The
Management Company receives a management fee at an annual rate equal to 2.5% of
the available capital and is payable quarterly in arrears. In addition, the
Management Company will receive an incentive fee equal to 10% of the
Partnership's cumulative distributions from Enhanced Yield Investments
(excluding returns of capital) over the life of the Partnership, subject to
payment of a priority return to the limited partners. During the three months
ended March 31, 1994, the Partnership reversed the accrual of all deferred
incentive fees, due to an increase in the accrued priority return and a decrease
in net unrealized appreciation on Enhanced Yield Investments, resulting in a
reduction of investment expense in the amount of $235,494 in the Statements of
Operations for such period. The Management Company also receives compensation
for providing certain administrative
-12-
services to the Partnership on terms determined by the Independent General
Partners as being no less favorable to the Partnership than those obtainable
from competent unaffiliated parties. The Management Company also has management
agreements with the Managing Partner and Equus II Incorporated ("EQS"), a
Delaware corporation, and with Equus Equity Appreciation Fund, L.P. ("EEAF"), a
Delaware limited partnership.
The Managing Partner is controlled by the Management Company which in turn
is controlled by a privately owned corporation. The Managing Partner is also the
managing general partner of EEAF and is a subordinated investment advisor to
EQS.
(3) SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Enhanced Yield Investments are carried at fair
value with the net change in unrealized appreciation or depreciation included in
the determination of partners' capital. Cost is used to approximate fair value
until significant developments affecting an Enhanced Yield Investment provide a
basis for use of an appraisal valuation. Thereafter, Enhanced Yield Investments
are carried at appraised values as determined quarterly by the Managing Partner,
subject to the approval of the Independent General Partners. The fair value of
debt securities, which are generally held to maturity, are determined on the
basis of the terms of the debt securities and the financial condition of the
issuer. Because of the inherent uncertainty of the valuation of Enhanced Yield
Investments which do not have readily ascertainable market values, the Managing
Partner's estimate of fair value may significantly differ from the fair value
that would have been used had a ready market existed for such investments.
Appraised values do not reflect brokers' fees, other normal selling costs or
management incentive fees which might become payable on disposition of such
investments. Such management incentive fees are recorded in total in the
Partnership's Financial Statements. (See Note 2).
Investment Transactions - Investment transactions are recorded on the
accrual method. Realized gains and losses on investments sold are computed on a
specific identification basis.
Income Taxes - No provision for income taxes has been made since all
income and losses are allocable to the partners for inclusion in their
respective tax returns.
Cash Flows - For purposes of the Statements of Cash Flows, the Partnership
considers all highly liquid temporary cash investments purchased with an
original maturity of three months or less to be cash equivalents.
(4) ALLOCATIONS AND DISTRIBUTIONS
The Partnership's cumulative net distributions from Enhanced Yield
Investments in excess of returns of capital will be shared in proportion to the
partners' capital contributions until the limited partners have received a
priority return, and thereafter are designed so that such distributions
generally will ultimately be shared 80% by the general and limited partners in
proportion to their capital contributions, 10% by the Managing Partner as an
incentive distribution and 10% by the Management Company as an incentive fee.
The priority return of $3,285,499 and $2,051,785 at March 31, 1995 and 1994,
respectively, is equal to the cumulative, non-compounded return on the average
daily amount of the gross capital contributions represented by Enhanced Yield
Investments ranging from 10 to 12% per annum, depending on the date of the
original contribution, less amounts previously distributed related to such
return. For financial reporting purposes, net unrealized appreciation or
depreciation is allocated to
-13-
the partners' capital accounts as if it were realized.
Income from any source other than Enhanced Yield Investments is generally
allocated to the partners in proportion to the partners' capital contributions.
Indirect expenses of the Partnership are allocated between Enhanced Yield
Investments and Temporary Investments on a pro rata basis based on the average
assets from each type of investment.
Subject to certain provisions in the Partnership agreement, net investment
income and gains and losses on investments are generally allocated between the
general partners and the limited partners on the same basis as cash
distributions.
(5) TEMPORARY CASH INVESTMENTS
Temporary cash investments, which represent the short-term utilization of
cash prior to investment in Enhanced Yield Investments, distributions to the
partners or payment of expenses, consisted of money money market accounts
earning interest at 3.69% at March 31, 1995.
(6) ENHANCED YIELD INVESTMENTS
The Partnership made follow-on investments of $275,000 and $119,000 in
Enhanced Yield Investments of one company during the three months ended March
31, 1995 and 1994, respectively.
(7) NOTE PAYABLE
On March 31, 1994, the Partnership entered into a $1,500,000 revolving
line of credit note payable with a bank. On March 15, 1995, the line of credit
was increased to $1,750,000. This prime rate line of credit is used to fund the
Partnership's follow-on investments. The prime rate was 9.0% at March 31, 1995.
On March 31, 1995 and December 31, 1994, the Partnership had $1,600,000 and
$1,300,000, respectively, outstanding under such line of credit, which is due
September 30, 1995. The line of credit is secured by the Partnership's
investment in Drypers Corporation and Champion Healthcare Corporation. The
average daily balance outstanding on such line of credit during the three months
ended March 31, 1995 was $1,314,017.
(8) COMMITMENTS AND CONTINGENCIES
The Partnership has committed to invest, under certain circumstances, an
additional $50,000 in Garden Ridge Corporation and $300,000 in Maxim Engineers,
Inc ("Maxim").
(9) SUBSEQUENT EVENT
On May 9, 1995, Garden Ridge Corporation effected a 4.5-for-1 stock split
of its outstanding common stock in connection with an initial public offering
("IPO") of its common stock. The number of shares held by the Partnership has
been adjusted to reflect such stock split as of March 31, 1995. The common stock
of Garden Ridge Corporation was issued at $15 per share in the IPO.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The initial closing of the sale of units of limited partners' interests
("Units") was completed on October 6, 1989, and additional quarterly closings
were held through December 31, 1990. The Partnership's total contributed capital
was $12,435,691, consisting of $12,307,375 (net of $2,625 in selling commission
discounts on sales to affiliates) for 12,310 Units from 1,428 limited partners,
$125,316 from the Managing Partner and $3,000 from the Independent General
Partners. Net proceeds to the Partnership, after payment of selling commissions
and wholesale marketing assistance fees of $1,228,375 and payment of $615,500 as
reimbursement of offering costs, were $10,591,816.
At March 31, 1995, the Partnership had $10,870,971 (at cost) invested in
Enhanced Yield Investments of nine companies, and had committed to invest up to
an additional $350,000 in the Enhanced Yield Investments of two existing
Portfolio Companies under certain conditions.
At March 31, 1995, the Partnership had $90,172 invested in cash and
temporary cash investments, consisting of money market securities. In order to
allow Follow-on Investments in Enhanced Yield Investments when such
opportunities arise, the Partnership may utilize proceeds from existing Enhanced
Yield Investments or borrowings. At March 31, 1995, the Partnership has a
$1,750,000, prime rate, revolving line of credit with a bank, to be used to fund
Follow-on Investments. The Partnership had $1,600,000 and $1,300,000 outstanding
under such line of credit at March 31, 1995 and December 31, 1994, respectively,
which is due on September 30, 1995. Management believes that temporary cash
investments, proceeds from existing Enhanced Yield Investments and the revolving
line of credit provide the Partnership with the liquidity necessary to pay for
operating costs and expenses and for certain Follow-on Investments.
Net investment income and the proceeds from the sale of Enhanced Yield
Investments are distributed to the extent such amounts are not reserved for
payment of expenses and contingencies or used to make Follow-on Investments in
existing Enhanced Yield Investments.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
Net investment income (loss) after all expenses amounted to $(73,357) and
$199,520 for the three months ended March 31, 1995 and 1994, respectively. The
decrease from 1994 was primarily due to The reversal of $235,494 of deferred
incentive fees recorded in 1994. The Partnership earned $51,139 and $68,394 in
income from Enhanced Yield Investments during the three months ended March 31,
1995, and 1994, respectively. The decrease in 1995 was due primarily to a
decrease in the amounts invested in Enhanced Yield Investments bearing current
yields and a reserve against the accrued interest receivable related to the
Partnership's investment in one company.
The Management Company receives a management fee equal to 2.5% of the
Available Capital, as defined. Such fee amounted to $59,113 and $65,261 for the
three months ended March 31, 1995, and 1994, respectively. The Management
Company is also allocated an incentive fee equal to 10% of the Partnership's
cumulative distributions from Enhanced Yield Investments (excluding returns of
capital) over the life of the Partnership, subject to payment of a priority
return to the limited partners. The
-15-
cumulative accrued priority return amounted to $3,285,499 and $2,051,785 at
March 31, 1995 and 1994, respectively. During 1994, the Partnership reversed the
accrual of all deferred incentive fees, due to an increase in the accrued
priority return and a decrease in net unrealized appreciation on Enhanced Yield
Investments, resulting in a reduction of investment expense in the amount of
$235,494 in the Statements of Operations for the three months ended March 31,
1994. Management fees and other expenses incurred directly by the Partnership
are paid with funds provided from operations.
UNREALIZED GAINS ON ENHANCED YIELD INVESTMENTS
Unrealized appreciation on Enhanced Yield Investments decreased by
$468,703 during the three months ended March 31, 1995. Such net decrease
resulted from the increase of $140,690 in the estimated fair value of Enhanced
Yield Investments of one company and the decrease of $609,393 in the estimated
fair value of Enhanced Yield Investments of one company.
Unrealized appreciation of Enhanced Yield Investments decreased $496,552
during the three months ended March 31, 1994. Such decrease resulted from the
decrease in the estimated fair value of Enhanced Yield Investments of one
company.
DISTRIBUTIONS
The Partnership made no cash distributions during the three months ended
March 31, 1995 or 1994. Cumulative cash distributions to limited partners from
inception to March 31, 1995, were $873,297, or $75.53 per weighted average
number of Units outstanding.
ENHANCED YIELD INVESTMENTS
During the three months ended March 31, 1995 and 1994, the Partnership
made follow on investments of $275,000 and $119,000, respectively in CMC
Holdings Inc. in the form of 12% and 11% promissory notes.
Of the companies in which the Partnership has investments at March 31,
1995, only Champion Healthcare Corporation and Drypers Corporation are publicly
held. The others each have a small number of shareholders and do not generally
make financial information available to the public. However, each company's
operations and financial information are reviewed by the General Partners to
determine the proper valuation of the Partnership's investment.
SUBSEQUENT EVENT
On May 9, 1995, Garden Ridge Corporation effected a 4.5-for-1 stock split
of its outstanding common stock in connection with an initial public offering
("IPO") of its common stock. The number of shares held by the Partnership has
been adjusted to reflect such stock split as of March 31, 1995. The common stock
of Garden Ridge Corporation was issued at $15 per share in IPO.
-16-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Partnership during the period
for which this report is filed.
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.
Date May 11, 1995 EQUUS CAPITAL PARTNERS, L.P.
By: Equus Capital Corporation
Managing General Partner
/s/ NOLAN LEHMANN
--------------------------------------------------
Nolan Lehmann
President and Principal Financial
and Accounting Officer
-17-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 27,174
<SECURITIES> 11,625,556
<RECEIVABLES> 75,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,727,896
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,727,896
<CURRENT-LIABILITIES> 1,637,884
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,090,012
<TOTAL-LIABILITY-AND-EQUITY> 11,727,896
<SALES> 0
<TOTAL-REVENUES> 51,454
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 563,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,657
<INCOME-PRETAX> (542,060)
<INCOME-TAX> 0
<INCOME-CONTINUING> (542,060)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (542,060)
<EPS-PRIMARY> (43.58)
<EPS-DILUTED> (43.58)
</TABLE>
