UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 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)
Registrant's telephone number, including area code: (201)
447-9000
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
RIDGEWOOD ELECTRIC POWER TRUST IV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1998 1997
Assets:
Cash and cash equivalents $ 1,848,187 $ 11,086,281
Accounts receivable, trade 1,117,128 657,217
Due from affiliates 199,306 164,536
Other assets 452,451 383,810
Total current assets 3,617,072 12,291,844
Investments:
Investment in Maine Hydro Projects 6,978,564 6,694,826
Investment in and loans to
Maine Biomass Projects 6,433,360 6,617,862
Investment in Santee River Project 4,469,650 ---
Electric power equipment held for resale 455,182 455,182
Deferred due diligence costs --- 27,159
Plant and equipment: 16,410,276 14,949,735
Less- Accumulated depreciation (1,606,131) (1,068,812)
Electric power sales contract 8,338,040 8,338,040
Less- Accumulated amortization (1,359,519) (946,212)
Debt reserve fund 605,199 605,199
Total assets $ 44,341,693 $ 47,964,823
Liabilities and Shareholders' Equity:
Current maturities of long-term debt $ 636,221 $ 592,193
Accounts payable and accrued expenses 374,450 384,533
Due to affiliates 414,125 658,253
Total current liabilities 1,424,796 1,634,979
Long-term debt, less current portion 4,365,245 4,848,067
Minority interest in the Providence Project 6,285,526 6,458,416
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (476.8 shares
issued and outstanding) 32,348,532 35,078,194
Managing shareholder's accumulated deficit (82,406) (54,833)
Total shareholders' equity 32,266,126 35,023,361
Total liabilities and shareholders' equity $ 44,341,693 $ 47,964,823
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS
ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
Nine Months Ended Quarter Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
Net sales $ 5,123,329 $ 4,850,561 $ 1,692,142 $ 1,605,288
Sublease income 276,750 276,750 92,250 92,250
Total revenues 5,400,079 5,127,311 1,784,392 1,697,538
Cost of sales 3,618,948 3,434,865 1,208,045 1,066,018
Gross profit 1,781,131 1,692,446 576,347 631,520
General and
administrative expenses 502,766 286,784 160,971 50,000
Management fee 840,213 874,720 280,071 296,076
Project due diligence costs 230,809 15,722 211,640 382
Other expenses 10,983 25,441 8,055 9,083
Total other
operating expenses 1,584,771 1,202,667 660,737 355,541
Income
(loss) from operations 196,360 489,779 (84,390) 275,979
Other income (expense):
Interest income 329,150 755,734 52,896 204,809
Interest expense (377,844) (436,794) (122,438) (135,600)
Income from
Maine Hydro Projects 583,737 595,928 (103,803) (177,771)
Loss from
Maine Biomass Projects (434,502) (214,213) (123,469) (214,213)
Net other income 100,541 700,655 (296,814) (322,775)
Income (loss)
before minority interest 296,901 1,190,434 (381,204) (46,796)
Minority interest
in the earnings
of the Providence Project (359,212) (414,063) (109,141) (185,678)
Net income (loss) $ (62,311) $ 776,371 $ (490,345) $ (232,474)
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
(unaudited)
Managing
Shareholders Shareholder Total
Shareholders' equity, December 31, 1997 $ 35,078,194 $ (54,833) $ 35,023,361
Cash distributions (2,667,974) (26,950) (2,694,924)
Net loss for the period (61,688) (623) (62,311)
Shareholders' equity, September 30, 1998 $ 32,348,532 $ (82,406) $ 32,266,126
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997
(Unaudited)
Nine Months Ended
September 30, September 30,
1998 1997
(unaudited)
Cash flows from operating activities:
Net income (loss) $ (62,311) $ 776,371
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation and amortization 950,626 773,586
Amortization of prepaid and accrued royalties- net --- 144,535
Minority interest in earnings
of the Providence Project 359,212 414,063
Income from unconsolidated Maine Hydro Projects (583,737) (595,928)
Loss from unconsolidated Maine Biomass Projects 434,502 214,213
Changes in assets and liabilities:
Increase in accounts receivable, trade (459,911) (59,836)
(Increase) decrease in other assets (68,641) 402,549
Decrease in accounts payable and accrued expenses (10,083) (161,159)
(Decrease) increase in due to affiliates, net (278,898) 191,738
Total adjustments 343,070 1,323,761
Net cash provided by operating activities 280,759 2,100,132
Cash flows from investing activities:
Investment in Maine Hydro Projects --- 947,884
Investment in Santee River Project (4,469,650) ---
Loans to Maine Biomass Projects (250,000) (7,311,327)
Distributions from Maine Hydro Projects 299,999 ---
Capital expenditures (1,460,541) (2,458,619)
Deferred due diligence costs 27,159 (269,233)
Net cash used in investment activities (5,853,033) (9,091,295)
Cash flows from financing activities:
Cash distributions to shareholders (2,694,924) (2,381,303)
Payments to reduce long-term debt (438,794) (402,344)
Distribution to minority interest (532,102) (690,754)
Net cash used in financing activities (3,665,820) (3,474,401)
Net decrease in cash and cash equivalents (9,238,094) (10,465,564)
Cash and cash equivalents, beginning of period 11,086,281 22,685,829
Cash and cash equivalents, end of period $ 1,848,187 $12,220,265
<FN>
See Accompanying Notes to Financial Statements
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
1. General
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments, which
consist of normal recurring adjustments, necessary
for the pair 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 1997 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. Loans to Biomass Project
In the first quarter of 1998, the Trust loaned $250,000
to Indeck Maine Energy, L.L.C. ("Maine Biomass Projects").
The loan is in the form of two demand notes that bear
interest at 5% per annum. Ridgewood Electric Power
Trust V, which owns an identical preferred membership
interest in the Maine Biomass Projects, also made
identical loans to the Maine Biomass Projects. The
other Maine Biomass Project members also loaned $500,000
to the Maine Biomass Projects with the same terms.
3. Investment in Santee River Rubber Project
In September 1998, the Trust and an affiliate,
Ridgewood Electric Power Trust V ("Trust V"),
purchased preferred membership interests in Santee
River Rubber Company, LLC, a newly organized South
Carolina limited liability company ("Santee River").
Santee River is building a waste tire and rubber
processing facility located near Charleston, South
Carolina. The Trust and Trust V purchased the interests
through a limited liability company owned one-third by the
Trust and two-thirds by Trust V. The Trust's share of the
purchase price was $4,469,650 and Trust V's share of the
purchase price was $8,939,301.
Until the facility begins operations, Santee River
will pay the Trust and Trust V interest at 12% per year
on their investment. After operations begin, the Trusts
are entitled to receive all cash flow after payment of
debt and other obligations until the Trusts receive a
cumulative 20% return on investment. Thereafter, the
Trusts receive 25% of any remaining cash flow available
for distribution. All cash distributions and tax
allocations received from Santee River are shared
one-third by the Trust and two-thirds by Trust V.
The Trusts have the right to designate two of the five
members of Santee River and have the further right
to remove a third member and designate a successor in the
event of certain defaults under Santee River's
operating agreement. The remaining equity interest is
owned by a wholly-owned subsidiary of Environmental
Processing Systems, Inc. of New York.
At the same time as the Trusts purchased their membership
interests, Santee River borrowed $16,000,000 through
tax exempt revenue bonds and another $16,000,000 through
taxable convertible bonds. It also obtained $4,500,000 of
subordinated financing from the general contractor of the
facility.
The project has been designed to receive and process waste
tires and other waste rubber products and produce fine
crumb rubber of various sizes. The processing will
include both ambient and cryogenic processing equipment
using liquid nitrogen. Santee River anticipates
that the final product will be fine crumb rubber that
can be used to manufacture new tires or to replace virgin
rubber in many applications.
Santee River has entered into long-term agreements
for the supply of its requirements for waste tires,
electricity and liquid nitrogen. Santee River
has entered into short-term (ranging from one to three
years) crumb rubber sales contracts for a portion of the
facility's output with Goodyear Tire & Rubber Company,
Continental - General Tire, Inc., British Tire & Rubber,
Inc. and Recycled Solutions for Industry, Inc. The
agreements are contingent upon successful testing of the
facility's output.
The Trust's investment in Santee River will be
accounted for under the equity method of accounting. The
Santee River plant is in the construction stage.
Accordingly, the project has no results of operations.
4. Purchase of Pump Services Operations
On October 16, 1998, the Trust and Ridgewood Electric Power
Trust II ("Trust II") entered into a Termination and Sale
Agreement with H.E.P., Inc. ("H.E.P."), the operator of the
Trust and Trust II's California Pumping Projects. Under the
terms of the agreement, H.E.P. ceased operating the projects
and transferred all project related assets to the Trust and
Trust II. The Trust and Trust II paid $94,160 and $105,840
respectively, to H.E.P. as consideration under this agreement.
Ridgewood Power Corporation is the managing shareholder of
both the Trust and Trust II. Ridgewood Power Management
Corporation, an entity related to Ridgewood Power Corporation
through common ownership, will operate the projects.
5. Administrative Proceeding at the Providence Project
On August 6, 1998, Ridgewood/Providence Power Partners, L.P.
("RPPP"), a limited partnership through which the Trust
owns its limited partnership interest in the Providence
Project, was notified by the Region I office of the U.S.
environmental Protection Agency ("EPA") that the EPA is
considering an administrative proceeding against RPPP to
recover civil penalties of up to $190,000 for alleged
violations of operational recordkeeping and training
requirements at the Providence Project. An administrative
complaint was filed in September 1998 and RPPP has answered.
RPPP is entering into discussions with the EPA as to the
merits of the allegations and sanctions, if any, and expects
that it will resolve the matter during 1998. RPPP does
not anticipate a material adverse impact from the proceeding
and does not anticipate the need to make further material
capital expenditures to remedy the items identified by
the EPA. The Trust is considering whether the cost of
non-mandated environmental improvements at other sites
may be eligible for offset against any final sanctions.
The Trust does not anticipate that it will be liable
for or will have to fund the costs of the proceeding,
although those costs will reduce cash flow from the
Project.
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 only the
accounts of the Trust and of the subsidiaries owning the
Providence and Pump Services Projects. The Trust uses
the equity method of accounting for its investments in
the Maine Hydro Projects, the Maine Biomass Projects
and Santee River LLC.
Results of Operations
In the first nine months of 1998, the Trust had total
revenues of $5,400,000, which were slightly higher than
the total revenue of $5,127,000 in the same period in
1997. Revenues in the third quarter of 1998 of $1,784,000
were also slightly higher than the 1997 third quarter
revenues of $1,698,000. Cost of sales of $3,619,000 in
the first nine months of 1998 were also slightly higher
than the cost of sales of $3,434,000 in the first nine
months of 1997. Cost of sales in the third quarter of
1998 of $1,208,000 were also slightly higher than the 1997
third quarter cost of sales of $1,066,000. The increases in
both revenues and costs of sales in 1998 are attributable
to the higher production levels achieved at the Providence
project in 1998.
General and administrative expenses for the nine months
ended June 30, 1998 were $216,000 higher than the amount
for the same period in 1997 because in 1997 a portion of
the general and administrative costs paid to Ridgewood Power
Management Corporation were capitalized as part of the costs
of adding a ninth engine to the Providence project. General
and administrative expenses in the third quarter of 1998
were $111,000 higher than in the same period in 1997 for
the same reason.
Project due diligence costs in the third quarter of 1998
were $212,000 higher than in the third quarter of 1997
primarily due to the write off of costs associated with a
rejected potential investment in a series of landfill gas
fueled generation plants. Project due diligence costs for
the first nine months of 1998 increased by $215,000 for the
same reason.
Interest income declined from $205,000 in the third quarter
of 1997 to $53,000 in the third quarter of 1998 and from
$756,000 in the first nine months of 1997 to $329,000 in
the first nine months of 1997 due to lower average cash
balances.
Interest expense was slightly lower in 1998 due to lower
borrowings outstanding at the Providence project.
The Trust's equity in income from the Maine Hydro Projects
decreased from $596,000 in the first nine months of 1997 to
$584,000 in the same period in 1998 but improved from a loss
of $178,000 in the third quarter of 1997 to a loss of $104,000
in the same period in 1998. These variations were caused by
changes in project revenues resulting from precipitation
fluctuations affecting the flow of water and were within the
expected range of variations. The Trust recorded a loss of
$435,000 in the first nine months of 1998 and a loss of
$123,000 in the third quarter of 1998 with respect to its
equity in Maine Biomass Projects that was acquired in
July 1997. The projects are not operating (except for
required testing) but in April 1998 they began selling
"installed capability" (a measure of their capability to
provide electricity) under contract to participants in the
New England Power Pool. Revenues from those sales caused
the loss attributable to the Trust from the Maine Biomass
Projects to be significantly reduced in the second and
third quarters of 1998.
Liquidity and Capital Resources
During the first nine months of 1998, the Trust's operating
activities generated $281,000 of cash compared to $2,100,000
during the same period in 1997, as the result of the factors
discussed above. Capital expenditures during the first nine
months of 1998 decreased to $1,461,000 from $2,459,000 in
the same period in 1997 because most of the necessary
improvements at the Providence plant have been completed.
Cash distributions to shareholders increased to $2,695,000
in the first nine months of 1998 from $2,381,000 in the
same period in 1997 due to an increase in the frequency of
distributions from quarterly to monthly in July 1997. The
increase was lessened by a decrease in the distribution
rate from $650 per share to $500 per share in August 1998.
In September 1998, the Trust and an affiliate, Ridgewood
Electric Power Trust V ("Trust V"), purchased a preferred
membership interest in Santee River Rubber Company, LLC,
("Santee River"). Santee River is building a waste tire
and rubber processing facility located near Charleston,
South Carolina. The Trust's share of the net purchase
price was $4,469,650 and Trust V's share of the purchase
price was $8,939,301.
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. There have been no
borrowings under the line of credit in 1998.
Other than investments of available cash in power generation
Projects, 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 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.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K. The Trust filed a current
Report on Form 8-K, dated August 14, 1998,
Reporting at Item 2 the acquisition of an
Interest in Santee River.
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
Date: November 18, 1998 By /s/ Martin V. Quinn
Martin V. Quinn
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)