FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2000
Commission file Number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact name of registrant as specified in its charter.)
Delaware 22-3324608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201) 447-9000
----------------
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 [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust IV
Consolidated Financial Statements
September 30, 2000
Ridgewood Electric Power Trust IV
Consolidated Balance Sheet
September 30, December 31,
2000 1999
----------- ------------
Assets: (unaudited)
Cash and cash equivalents ...................... $ 1,121,063 $ 893,383
Accounts receivable, trade ..................... 1,279,045 613,002
Due from affiliates ............................ 907,125 442,432
Other assets ................................... 74,237 60,863
------------ ------------
Total current assets .......................... 3,381,470 2,009,680
------------ ------------
Investments:
Maine Hydro Projects ........................... 5,142,875 5,663,505
Maine Biomass Projects ......................... 5,529,722 5,825,271
Santee River Rubber Project .................... -- 4,090,601
Electric power equipment held for resale ....... 250,000 250,000
Plant and equipment ............................ 16,824,198 16,789,544
Accumulated depreciation ....................... (3,691,680) (2,957,855)
------------ ------------
13,132,518 13,831,689
------------ ------------
Electric power sales contract .................. 8,338,040 8,338,040
Accumulated amortization ....................... (2,474,843) (2,057,950)
------------ ------------
5,863,197 6,280,090
------------ ------------
Spare parts inventory .......................... 838,142 838,142
Debt reserve fund .............................. 695,983 666,346
------------ ------------
Total assets .................................. $ 34,833,907 $ 39,455,324
------------ ------------
Liabilities and Shareholders' Equity:
Liabilities:
Current maturities of long-term debt ........... $ 770,302 $ 716,995
Accounts payable and accrued expenses .......... 1,409,129 611,750
Due to affiliates .............................. 703,057 341,018
------------ ------------
Total current liabilities ..................... 2,882,488 1,669,763
Long-term debt, less current portion ........... 2,894,884 3,479,460
Minority interest in the Providence Project .... 5,722,516 5,924,813
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (476.8875
investor shares issued
and outstanding) ............................ 23,505,746 28,502,542
Managing shareholder's accumulated deficit (1
management share issued and outstanding) .... (171,727) (121,254)
----------- ------------
Total shareholders' equity .................... 23,334,019 28,381,288
------------ ------------
Total liabilities and shareholders' equity .... $ 34,833,907 $ 39,455,324
------------ ------------
See accompanying notes to consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
------------------------ -------------------------
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales .............. $ 5,580,374 $ 5,325,510 $ 1,935,826 $ 1,838,601
Sublease income ........ 276,750 276,750 92,250 92,250
----------- ----------- ----------- -----------
Total revenues ....... 5,857,124 5,602,260 2,028,076 1,930,851
Cost of sales .......... 4,445,050 4,608,550 1,353,363 1,522,499
----------- ----------- ----------- -----------
Gross profit ........... 1,412,074 993,710 674,713 408,352
General and
administrative expenses 656,070 518,634 164,822 162,405
Management fee ......... 212,860 350,451 -- 116,817
Writedown of Santee
River Rubber Project .. 3,910,080 -- 3,910,080 --
----------- ----------- ----------- -----------
Total other
operating expenses ... 4,779,010 869,085 4,074,902 279,222
----------- ----------- ----------- -----------
Income (loss)
from operations ....... (3,366,936) 124,625 (3,400,189) 129,130
----------- ----------- ----------- -----------
Other income (expense):
Interest income ........ 72,267 142,450 31,775 96,874
Interest expense ....... (285,371) (333,816) (90,875) (107,410)
Income from Maine
Hydro Projects ........ 279,370 459,874 (382,363) (194,787)
(Loss) income from
Santee River Rubber
Project ............... (180,521) 104,583 -- 40,748
Loss from Maine Biomass
Projects .............. (295,549) (666,216) (125,453) (255,719)
----------- ----------- ----------- -----------
Net other income (loss) (409,804) (293,125) (566,916) (420,294)
----------- ----------- ----------- -----------
Loss before
minority interest ..... (3,776,740) (168,500) (3,967,105) (291,164)
Minority interest in
the earnings of the
Providence Project .... (288,911) (144,443) (180,409) (60,991)
----------- ----------- ----------- -----------
Net loss ............... $(4,065,651) $ (312,943) $(4,147,514) $ (352,155)
----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholder Total
------------ ------------ ------------
Shareholders' equity,
December 31, 1999 .... $ 28,502,542 $ (121,254) $ 28,381,288
Cash distributions .... (971,802) (9,816) (981,618)
Net loss for the period (4,024,994) (40,657) (4,065,651)
------------ ------------ ------------
Shareholders' equity,
September 30, 2000 ... $ 23,505,746 $ (171,727) $ 23,334,019
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
--------------------------
September 30, September 30,
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss ...................................... $(4,065,651) $ (312,943)
----------- -----------
Adjustments to reconcile net loss
to net cash flows from operating
activities:
Depreciation and amortization ................ 1,150,718 1,108,788
Minority interest in earnings of the
Providence Project .......................... 288,911 144,443
Income from Maine Hydro Projects ............. (279,370) (459,874)
Loss from Maine Biomass Projects ............. 295,549 666,216
Loss (income) from Santee River
Rubber Project .............................. 180,521 (104,583)
Writedown of investment in Santee
River Rubber Project ........................ 3,910,080
Changes in assets and liabilities:
Increase in accounts receivable, trade ...... (666,043) (552,408)
(Increase) decrease in due from
affiliates ................................. (464,693) 243,777
Increase in other assets .................... (13,374) (80,380)
Increase (decrease) in accounts
payable and accrued expenses ............... 797,379 (116,063)
Increase in due to affiliates ............... 362,039 253,439
----------- -----------
Total adjustments ........................... 5,561,717 1,103,355
----------- -----------
Net cash provided by operating
activities ................................. 1,496,066 790,412
----------- -----------
Cash flows from investing activities:
Loans to Maine Biomass Projects .............. -- (225,000)
Distributions from Maine Hydro Projects ...... 800,000 400,000
Distributions from Santee River Rubber Project -- 341,428
Capital expenditures ......................... (34,654) (402,077)
----------- -----------
Net cash provided by investing activities ... 765,346 114,351
----------- -----------
Cash flows from financing activities:
Borrowings under line of credit facility ...... 500,000 --
Repayments of credit facility ................. (500,000) --
Cash distributions to shareholders ............ (981,618) (1,397,039)
Payments to reduce long-term debt ............. (531,269) (482,824)
Increase in debt reserve fund ................. (29,637) (20,879)
Distribution to minority interest ............. (491,208) (358,497)
----------- -----------
Net cash used in financing activities ......... (2,033,732) (2,259,239)
----------- -----------
Net increase (decrease) in cash and
cash equivalents ............................. 227,680 (1,354,476)
Cash and cash equivalents, beginning of year .. 893,383 2,021,168
----------- -----------
Cash and cash equivalents, end of period ...... $ 1,121,063 $ 666,692
----------- -----------
See accompanying notes to consolidated financial statements
Ridgewood Electric Power Trust IV
Notes to Consolidated Financial Statements (unaudited)
1. General
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, which consist of normal recurring adjustments,
necessary for the fair presentation of the results for the interim periods.
Additional footnote disclosure concerning accounting policies and other matters
are disclosed in Ridgewood Electric Power Trust IV's financial statements
included in the 1999 Annual Report on Form 10-K, which should be read in
conjunction with these financial statements. Certain prior year amounts have
been reclassified to conform to the current year presentation.
The results of operations for an interim period should not necessarily be taken
as indicative of the results of operations that may be expected for a twelve
month period.
2. Writedown of investment in Santee River Rubber Company
As previously disclosed in the Trust's Annual Reports on Form 10-K and its most
recent Quarterly Report on Form 10-Q, dated August 14, 2000, the Trust
beneficially owns a 33% preferred membership interest in Santee River Rubber
Company, LLC ("Santee River"), a South Carolina limited liability company.
Santee River has constructed a used tire recycling plant located in Berkeley
County, South Carolina, financed with $32 million of industrial revenue bonds.
During the third quarter of 2000, Ridgewood Power (on behalf of the Trust and
Trust V), Environmental Processing Services, Inc. (the manager of the Santee
River Project) and the holders of the Project's industrial revenue bonds
attempted to negotiate a change in management and to refinance the Santee River
Project. The negotiations failed and on October 26, 2000 Santee River Rubber
Company filed for Chapter 11 bankruptcy in the U.S. District Court for South
Carolina. On November 2, 2000, the U.S. Bankruptcy Court ordered that a trustee
in bankruptcy be appointed to manage Santee River. As a result, the Trust
determined that it would be unlikely to recover its investment in Santee River
Rubber Company. As a result, the Trust recorded a writedown of $3,910,080 in the
third quarter of 2000 to reduce the estimated fair value of the investment to
zero.
3. Summary results of Operations for Selected Investments
Summary results of operations for the Maine Hydro Projects, which are accounted
for under the equity method, were as follows:
Nine Months Ended September 30,
2000 1999
---- ----
Total revenue $ 3,082,000 $ 3,195,000
Depreciation and amortization 841,000 829,000
Net income 559,000 920,000
Summary results of operations for the Maine Biomass Projects, which are
accounted for under the equity method, were as follows:
Nine Months Ended September 30,
2000 1999
---- ----
Total revenue $ 1,838,000 $ 925,000
Depreciation and amortization 177,000 136,000
Net loss (591,000) (1,332,000)
Summary results of operations for the Santee River Rubber Project, which is
accounted for under the equity method, were as follows. Information for Santee
River Rubber for 2000 is only through June 30, 2000 because third quarter
information is not available. See note 2 above.
Nine Months Ended September 30,
2000 1999
Total revenue $ 601,000 $ ---
Depreciation and amortization --- ---
Net loss (2,166,000) (1,080,000)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are rounded to the nearest
$1,000.
Introduction
The consolidated financial statements include the accounts of the Trust and the
limited partnerships owning the Providence Project and the California Pumping
project. The Trust uses the equity method of accounting for its investments in
the Maine Hydro Projects, the Maine Biomass Projects and the Santee River Rubber
Project, which are owned 50% or less by the Trust.
Results of Operations
In the third quarter of 2000, the Trust had total revenue of $2,028,000, which
is comparable with total revenue of $1,931,000 in the same period in 1999. Total
revenues for the first nine months of 2000 of $5,857,000 were also comparable
with total revenue of $5,602,000 in the same period in 1999. Cost of sales of
$1,353,000 in the third quarter of 2000 ($4,445,000 in the first nine months of
2000) were also comparable with the cost of sales of $1,522,000 in the same
period in 1999 ($4,609,000 in the first nine months of 1999). Overall gross
margin in the first nine months of 2000 is improved due to lower maintenance and
repair costs mainly at the Providence Project.
General and administrative expenses in the third quarter of 2000, and first nine
months of 2000 were essentially even with the same periods in 1999. As discussed
in Note 2 to the September 30, 2000 financial statements, the Trust recorded a
writedown of $3,910,000 for the investment in the Santee River Rubber Company.
Interest income was reduced from $97,000 in the third quarter of 1999 ($142,000
for the first nine months of 1999) to $32,000 in the third quarter of 2000
($72,000 for the first nine months of 2000) due lower cash balances in 2000.
Interest expense was reduced from $107,000 in the third quarter of 1999
($334,000 for the first nine months of 1999) to $91,000 in the third quarter of
2000 ($285,000 for the first nine months of 2000) due to lower borrowings
outstanding at the Providence Project.
Equity income from the Maine Hydro Projects for the first nine months of 2000 of
$279,000 was lower compared to $460,000 in the same period of 1999, and the
equity loss in the third quarter of 2000 of $382,000 was substantially higher
than the third quarter 1999 loss of $195,000. Decreased overall revenues and
higher maintenance and labor costs attributed to the shortfall.
The equity loss from the shut-down Maine Biomass Projects decreased from
$256,000 in the third quarter of 1999 ($666,000 for the first nine months of
1999) to $125,000 in the third quarter of 2000 ($295,000 for the first nine
months of 2000) due to higher energy revenues and reduced maintenance costs.
The Trust recorded a loss of $181,000 from its equity interest in the Santee
River Rubber Project for the first nine months of 2000, compared to income in
1999 of $105,000. As previously stated in Note 2 of the September 30 financial
statements, the Trust recorded a writedown of $3,910,000 in the Santee River
Rubber Company.
The increase in the minority interest in the earnings of the Providence Project
from $61,000 in the third quarter of 1999 ($144,000 for the first nine months of
1999) to $180,000 in the third quarter of 2000 ($289,000 for the first nine
months of 2000) is a result of higher earnings from the Providence Project
caused primarily by lower maintenance costs.
Liquidity and Capital Resources
In 1997, the Trust and Fleet Bank, N.A. (the "Bank") entered into a revolving
line of credit agreement, whereby the Bank provides a three year committed line
of credit facility of $1,150,000. Outstanding borrowings bear interest at the
Bank's prime rate or, at the Trust's choice, at LIBOR plus 2.5%. The credit
agreement requires the Trust to maintain a ratio of total debt to tangible net
worth of no more than 1 to 1 and a minimum debt service coverage ratio of 2 to
1. The credit facility was obtained in order to allow the Trust to operate using
a minimum amount of cash, maximize the amount invested in Projects and maximize
cash distributions to shareholders. In the first quarter of 2000, the Trust
borrowed $500,000 under the credit facility, which was repaid in the third
quarter of 2000.
The Managing Shareholder announced a cessation of distributions in April 2000.
Obligations of the Trust are generally limited to payment of Project operating
expenses, payment of a management fee to the Managing Shareholder, payments for
certain accounting and legal services to third persons, repayment of borrowings
under the line of credit and distributions to shareholders of available
operating cash flow generated by the Trust's investments. The Trust's policy is
to distribute as much cash as is prudent to shareholders. Accordingly, the Trust
has not found it necessary to retain a material amount of working capital. The
amount of working capital retained is further reduced by the availability of the
line of credit facility.
The Trust anticipates that, during 2000, its cash flow from operations and the
line of credit facility will be adequate to fund its obligations.
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Trust from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future results
and the business climate and are found, among other places, in the notes to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the Trust has had to make
assumptions as to the future. It has also had to make estimates in some cases
about events that have already happened, and to rely on data that may be found
to be inaccurate at a later time. Because these forward-looking statements are
based on assumptions, estimates and changeable data, and because any attempt to
predict the future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's statements here.
The Trust therefore warns readers of this document that they should not rely on
these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Trust's most recent Annual Report on Form 10-K.
By making these statements now, the Trust is not making any commitment to revise
these forward-looking statements to reflect events that happen after the date of
this document or to reflect unanticipated future events.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Indeck Maine
On June 2, 2000, Indeck Maine Energy LLC, the owner of the Maine Biomass
Projects, brought a complaint before the Federal Energy Regulatory
Commission (Docket No. EL00-80-000) requesting FERC to remove bid
restrictions imposed on Indeck by ISO-New England, Inc., the operator of
the New England Power Pool. Those restrictions capped the price that the
ISO would pay for Indeck's electric power output at approximately $810 per
megawatt-hour, substantially less than Indeck's own bids. The complaint
also challenged the ISO's authority to impose those restrictions. On July
26, 2000 FERC ordered the ISO "to remove the bid restrictions previously
imposed on Indeck." FERC found that the ISO had not provided any evidence
to support its conclusion that the Indeck power bids materially affected
the markets. That conclusion was a necessary condition for imposing the
restrictions.
Because of their cost structure, the Maine Biomass Projects currently run
only during power shortages in the summer and occasionally at other times
when transmission constraints or local problems require their use. Thus the
lifting of the bid restrictions will not result in revenue increases unless
a power shortage or similar situation occurs in the future. The Trust does
not expect any such situation to occur during the rest of 2000,
although the weather in particular is unpredictable.
The FERC order does not expressly lift the bid restrictions for earlier
dates in 2000 and certain dates in 1999 on which the Projects sold power to
the ISO and there is some language in the order that could be read to say
that FERC did not invalidate the prior bid restrictions. The Trust believes
that the order clearly rejected the reasons given by the ISO for capping
Indeck's prices on most of those dates and also discredited the ISO's
decision to impose caps retroactively for the 1999 dates. The Trust intends
to bring additional complaints at FERC to clarify the order, to rescind the
price caps for those prior dates on which the Projects sold power and to
recover additional compensation for those sales based on the prices that
Indeck had submitted. Until such proceedings are resolved favorably to
Indeck or unless a settlement with the ISO results, the Trust will receive
no additional revenue from the ISO for those prior dates.
Indeck filed a Motion for Clarification, or Alternatively, Rehearing
before FERC, requesting that FERC confirm that the ISO's May 2000 price
caps were void and that Indeck is entitled to payment for those days.
In addition, the ISO has escrowed approximately $287,000 of Indeck's
revenues, based on the ISO's assertion that an overpayment was made for a
price-capped event in October 1999. The Trust expects to bring an
additional proceeding in the appropriate forum to recover the escrowed
amount and to invalidate the caps.
Indeck took action to recover payment for its operations at ISO-NE's
request during October 1999 which were not addressed in the FERC order. On
October 24, 2000, Indeck filed a complaint in the Superior Court of the
State of Delaware against the IS0-New England, Inc. to recover from the ISO
up to $27 million for electric power supplied to ISO-NE in October 1999 and
for other costs incurred. No answer has yet been filed.
Santee River Rubber Company
As disclosed at Note 2 to the Consolidated Financial Statements, a Chapter
11 voluntary bankruptcy proceeding against Santee River Rubber Company was
brought in the U.S. Bankruptcy Court for the District of South Carolina at
Charleston on October 25, 2000. Currently, only Santee River Rubber Company
is a party to the proceedings. Santee River Rubber Company is insolvent and
requires reorganization and additional capital if it is to resume
operation.
Other
On September 8, 2000, the Trust was named, along with the Managing
Shareholder, in a lawsuit filed in the Maryland Circuit Court, Baltimore
County, claiming that the Trust is responsible for alleged written
misrepresentations made to the Trust and to other unaffiliated issuers by
the investor's broker-dealer and registered representative. The total
amount invested in the Trust by the plaintiff is $25,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
---------
None
(b) Reports on Form 8-K
1) A current report on Form 8-K was filed with the Securities and
Exchange Commission on October 31, 2000 in connection with the Santee
River Rubber Company ("Santee River") filing a petition in bankruptcy
in the United States Bankruptcy Court for the District of South
Carolina on October 26, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIDGEWOOD ELECTRIC POWER TRUST IV
Registrant
November 13, 2000 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)