SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 33-87902
33-87902-01
33-87902-02
IEC FUNDING CORP.
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
-----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3255377
NEW JERSEY 04-2955646
MASSACHUSETTS 04-2955642
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
350 LINCOLN PLACE, HINGHAM, MASSACHUSETTS 02043
----------------------------------------- --------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 749-9800
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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
-------- -------
IEC FUNDING CORP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHEAST ENERGY ASSOCIATES AND
NORTH JERSEY ENERGY ASSOCIATES
Combined Balance Sheet at December 31, 1996 and
June 30, 1997 (Unaudited).........................................3
Combined Statement of Operations for the Three
Months and Six Months Ended June 30, 1996 and 1997 (Unaudited)....4
Combined Statement of Cash Flows for the
Six Months Ended June 30, 1996 and 1997 (Unaudited)...............5
Notes to Financial Statements (Unaudited).........................7
IEC FUNDING CORP.
Balance Sheet at December 31, 1996 and
June 30, 1997 (Unaudited).........................................8
Statement of Operations for the Three Months and Six Months Ended
June 30, 1996 and 1997 (Unaudited)...............................9
Statement of Cash Flows for the Six Months
Ended June 30, 1996 and 1997 (Unaudited)..........................10
Notes to Financial Statements (Unaudited).........................11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................12
PART II OTHER INFORMATION...................................................14
SIGNATURES...................................................................15
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, JUNE 30,
1996 1997
(IN THOUSANDS)
ASSETS
Current assets
Cash and cash equivalents $ 49,861 $ 45,211
Accounts receivable 43,671 47,301
Fuel inventories 5,410 3,468
Prepaid expenses and other current assets 2,566 3,607
--------- ---------
Total current assets 101,508 99,587
--------- ---------
Cogeneration facilities and carbon dioxide facility (net of
accumulated depreciation of $129,068,000 and $141,525,000
at December 31, 1996 and June 30, 1997 respectively) 373,781 361,385
Other fixed assets (net of accumulated depreciation of $438,000
and $484,000 at December 31, 1996 and June 30, 1997, respectively) 304 302
Unamortized financing costs 17,837 16,731
Other assets 3,806 4,203
Restricted cash 69,156 69,156
--------- ---------
Total non-current assets 464,884 451,777
--------- ---------
Total assets $ 566,392 $ 551,364
========= =========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities
Current portion of loans payable - IEC Funding Corp. $ 24,075 $ 22,819
Accounts payable 14,528 20,731
Other accrued expenses 2,037 5,768
Future obligations under interest rate swap agreements 2,022 1,394
--------- ---------
Total current liabilities 42,662 50,712
--------- ---------
Loans payable - IEC Funding Corp. 490,287 479,505
Amounts due utilities for energy bank balances 220,922 225,596
--------- ---------
Total non-current liabilities 711,209 705,101
--------- ---------
Total liabilities 753,871 755,813
--------- ---------
Partners' deficit
General partner (4,616) (4,785)
Limited partners (182,863) (199,664)
--------- ---------
Total partners' deficit (187,479) (204,449)
--------- ---------
Commitments and contingencies - -
Total liabilities and partners' deficit $ 566,392 $ 551,364
========= =========
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1997 1996 1997
(IN THOUSANDS)
Revenue
Power sales to utilities $53,967 $70,950 $131,540 $151,985
Steam sales 949 1,142 2,265 2,443
------- ------- -------- --------
Total revenue 54,916 72,092 133,805 154,428
------- ------- -------- --------
Costs and expenses
Cost of power and steam sales 30,079 39,234 70,771 77,482
Operation and maintenance 4,167 5,991 10,781 12,756
Depreciation 6,241 6,253 12,483 12,503
General and administrative
expenses 3,428 3,467 6,876 6,820
------- ------- -------- --------
Total costs and expenses 43,915 54,945 100,911 109,561
------- ------- -------- --------
Operating income 11,001 17,147 32,894 44,867
------- ------- -------- --------
Other expense (income)
Amortization of financing costs 600 547 1,213 1,106
Interest expense 12,588 12,055 25,152 24,093
Interest expense on energy
bank liabilities 4,887 4,334 9,592 8,594
Interest income (2,848) (2,403) (5,441) (4,592)
------- ------- -------- --------
Total other expense 15,227 14,533 30,516 29,201
------- ------- -------- --------
Net income (loss) $(4,226) $ 2,614 $ 2,378 $ 15,666
======= ======= ======== ========
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30,
1996 1997
(IN THOUSANDS)
Cash flows from operating activities:
Cash received from utilities and other customers $152,069 $148,268
Cash paid to suppliers (84,336) (83,852)
Interest paid (26,027) (24,703)
Bank commitment fees paid (18) (18)
Interest received 5,559 4,638
Cash payments to general partner for operating activities (2,566) (2,258)
Cash payments to owners/management (1,875) (1,835)
-------- --------
Net cash provided by operating
activities 42,806 40,240
-------- --------
Cash flows from investing activities:
Net expenditures for facilities (704) (172)
Purchase of other fixed assets (36) (44)
Decrease in restricted cash 4,098 -
-------- --------
Net cash provided by (used for)
investing activities 3,358 (216)
-------- --------
Cash flows from financing activities:
Principal payments on debt (12,602) (12,038)
Distributions to partners (30,816) (32,636)
-------- --------
Net cash used for financing activities (43,418) (44,674)
-------- --------
Net (decrease) increase in cash and cash equivalents 2,746 (4,650)
Cash and cash equivalents at beginning of period 58,277 49,861
-------- --------
Cash and cash equivalents at end of period $ 61,023 $ 45,211
======== ========
Non-cash Investing Activities:
At June 30, 1997 accrued capitalized facility costs were approximately
$52,000. Approximately $21,000 of these costs are related to fiscal year 1996.
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
SIX MONTHS
ENDED
JUNE 30,
1996 1997
(IN THOUSANDS)
Net income $ 2,378 $15,666
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 12,483 12,503
Amortization of
financing costs 1,213 1,106
Changes in assets and liabilities
Accounts receivable 13,142 (3,630)
Fuel inventories (321) 1,942
Prepaid expenses and other
current assets (934) (1,041)
Accounts payable 531 6,314
Other accrued expenses 1,440 3,731
Future obligations under
interest rate swap agreements (894) (628)
Amounts due utilities for
energy bank balances 14,182 4,674
Other assets (414) (397)
------- -------
Net cash provided by
operating activities $42,806 $40,240
======= =======
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited combined financial statements should be read in
conjunction with the audited combined financial statements included in the
Annual Report on Form
10-K for the year ended December 31, 1996 for Northeast Energy Associates, A
Limited Partnership, and North Jersey Energy Associates, A Limited
Partnership (together, the "Partnerships") and IEC Funding Corp.
The results of operations for the periods ended June 30, 1997 are unaudited
and are not necessarily indicative of the results to be expected for the full
year. The unaudited financial information at June 30, 1997 and for the
periods ended June 30, 1997 contains all adjustments, consisting only of
normal recurring adjustments, considered by management necessary for a fair
presentation of the operating results for such period.
2. RECLASSIFICATION
Certain reclassifications were made to prior year balances in order to
conform to current year presentation. These reclassifications had no effect
on prior year operating results.
3. DISTRIBUTIONS
Distributions to the partners may be made only after all required funds and
sub-funds have been fully funded as described in the trust indenture. After
funding all amounts required under the indenture, the excess cash available
during the period ended June 30, 1997 was in excess of approximately $32.6
million. All conditions under the trust indenture for distributions of such
excess cash were satisfied after April 1, 1997 resulting in a distribution of
approximately $5.3 million in May and $27.3 million in June to the partners
in proportion to their designated interests in the Partnerships.
IEC FUNDING CORP.
BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, JUNE 30,
1996 1997
(IN THOUSANDS)
ASSETS
Current assets
Cash $ 1 $ 1
Current portion of notes receivable from
Northeast Energy Associates and North Jersey
Energy Associates (together, the "Partnerships") 24,075 22,819
-------- --------
Total current assets 24,076 22,820
Notes receivable from the Partnerships 490,287 479,505
-------- --------
Total assets $514,363 $502,325
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of securities payable $ 24,075 $ 22,819
-------- --------
Total current liabilities 24,075 22,819
Securities payable 490,287 479,505
-------- --------
Total liabilities 514,362 502,324
Stockholders' equity
Common stock, no par value, 10,000 shares
authorized, issued and outstanding 1 1
-------- --------
Total liabilities and stockholders' equity $514,363 $502,325
======== ========
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1997 1996 1997
(IN THOUSANDS) (IN THOUSANDS)
Interest income $ 12,484 $ 11,952 $ 24,968 $ 23,905
Interest expense (12,484) (11,952) (24,968) (23,905)
-------- -------- -------- --------
$ - $ - $ - $ -
========= ======== ======== ========
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30
1996 1997
(IN THOUSANDS)
Cash Flows from operating activities:
Interest received from Partnerships $ 24,968 $ 23,905
Interest paid (24,968) (23,905)
-------- --------
Net cash provided by operating activities - -
-------- --------
Cash flows from investing activities:
Principal payment received from partnerships 12,602 12,038
Principal payment on debt (12,602) (12,038)
-------- --------
Net cash provided by investing activities - -
-------- --------
Cash flows from financing activities - -
-------- --------
Net increase in cash - -
-------- --------
Cash at beginning of period 1 1
-------- --------
Cash at end of period $ 1 $ 1
-------- --------
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 1996 for IEC Funding
Corp. (the "Company") and the Partnerships.
The unaudited financial information at June 30, 1997 and for the periods
ended June 30, 1997 contains all adjustments, consisting only of normal
recurring adjustments, considered by management necessary for a fair
presentation of the operating results for such period.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Total revenue for the second quarter of 1997 of $72.1 million increased by $17.2
million (31.3%) as compared to the same period in 1996. Revenue for the six
months ended June 30, 1997 of $154.4 million increased $20.6 million (15.4%) as
compared to the six months ended June 30, 1996. An increase in revenue of
approximately $12 million for the quarter and the year to date is the result of
increased generation and availability in 1997 as compared to the same period in
1996 when scheduled major maintenance outages occurred at the Bellingham
facility (during the second quarter of 1996 a major inspection and maintenance
program, scheduled at five year intervals, was conducted at the Bellingham
facility) and fewer curtailment hours were requested by the Sayreville Power
Purchaser during the second quarter of 1997. Additionally, increased revenue of
$4.8 million on a quarterly basis and $8.5 million on a year to date basis
resulted from reductions in energy bank principal balances (per scheduled or
specified rates under certain Bellingham power contracts). Increases in purchase
rates under certain Bellingham power contracts were offset slightly by lower
rates under the Sayreville power contract during the first six months of 1997.
Cost of power and steam sales as a percentage of gross revenue (gross of
decrease in energy bank balances) was 55.9% for the second quarter of 1997
versus 52.1% for the second quarter of 1996. Year to date cost as a percentage
of gross revenue was 51.5% in 1997 as compared to 51.1% in 1996. The primary
cause of the increase was a year to date price increase under a fuel supply
contract that services both facilities which was reflected in the second
quarter. Additionally, fuel consumption increased in support of the increase in
generation during the second quarter of 1997. On a year to date basis the
increased cost of power and steam is attributable to net natural gas price
increases, offset by a reduction in extended gas service rights exercised by a
North Jersey Energy Associates' fuel supplier during the first quarter of 1997
as compared to 1996.
Operation and maintenance (O&M) costs increased $1.8 million (43.8%) as compared
to the second quarter of 1996 and increased $2.0 million (18.3%) as compared to
the six months ended June 30, 1996. The primary cause of the increased cost is
the performance bonus (which is directly related to the higher generation
experienced during the second quarter of 1997) payable to the O&M contractor
under the Bellingham O&M agreement. Other increases, which include normal and
expected escalations on O&M contracts, were offset by decreases in water and
sewer charges and engineering costs.
General and Administrative expenses were $3.5 million for the second quarter of
1997 as compared to $3.4 million for the same period in the prior year. On a
year to date basis 1997 costs were $6.8 million as compared to $6.9 million in
1996. Consulting costs decreased, offsetting increases in legal and overhead
costs.
Interest expense decreased $.5 million (4.2%) as compared to the second quarter
of 1996 and decreased $1.1 million (4.2%) as compared to the six months ended
June 30, 1996. Interest on debt is decreasing in 1997 as a result of principal
payments made during 1996. Principal payments are made semi-annually on June
30, and December 30. Interest on energy bank balances decreased $.6 million
(11.3%) as compared to the second quarter of 1996 and decreased $1 million
(10.4%) as compared to the six months ended June 30, 1996. These decreases are
a result of changes to the underlying amounts accrued for energy bank
balances.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated during the period ended June 30, 1997 was more than
sufficient to fund all operating expenses as well as fund approximately $36
million of interest and principal required for payment on June 30, 1997. Excess
cash of $32.6 million was distributed to the partners during the second quarter.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of 1934,
IEC Funding Corp. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IEC FUNDING CORP.
DATE SIGNATURE AND TITLE
August 13, 1997 /s/ Maureen P. Herbert
- ------------------ ----------------------------------------
Maureen P. Herbert
Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1934,
North Jersey Energy Associates, A Limited Partnership has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTH JERSEY ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
August 13, 1997 /s/ Maureen P. Herbert
- ------------------ -----------------------------------------
Maureen P. Herbert
Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1934,
Northeast Energy Associates, A Limited Partnership has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTHEAST ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
August 13, 1997 /s/ Maureen P. Herbert
- ------------------ ----------------------------------
Maureen P. Herbert
Vice President of Finance