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 March 31, 1999
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
March 31, 1999
Ridgewood Electric Power Trust IV
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
March 31, December 31,
1999 1998
----------- ----------
Assets: ..................................... (unaudited)
Cash and cash equivalents ................... $ 1,155,439 $ 2,021,168
Accounts receivable, trade .................. 579,613 617,973
Due from affiliates ......................... 12,766 377,710
Other assets ................................ 54,519 57,975
------------ ------------
Total current assets ................. 1,802,337 3,074,826
------------ ------------
Investments:
Maine Hydro Projects ........................ 6,754,424 6,217,289
Maine Biomass Projects ...................... 6,238,665 6,306,818
Santee River Rubber ......................... 4,389,424 4,501,357
Electric power equipment held for resale .... 455,182 455,182
Plant and equipment ......................... 16,473,238 16,359,211
Accumulated depreciation .................... (2,304,375) (2,073,744)
------------ ------------
14,168,863 14,285,467
------------ ------------
Electric power sales contract ............... 8,338,040 8,338,040
Accumulated amortization .................... (1,641,047) (1,502,081)
------------ ------------
6,696,993 6,835,959
------------ ------------
Spare parts inventory ....................... 746,178 746,178
Debt reserve fund ........................... 645,085 637,108
------------ ------------
Total assets ........................ $ 41,897,151 $ 43,060,184
------------ ------------
Liabilities and Shareholders' Equity:
Liabilities:
Current maturities of long-term debt ........ $ 651,613 $ 651,613
Accounts payable and accrued expenses ....... 432,519 563,685
Due to affiliates ........................... 176,613 441,614
------------ ------------
Total current liabilities .......... 1,260,745 1,656,912
Long-term debt, less current portion ........ 4,039,345 4,196,455
Minority interest in the Providence Project . 6,138,885 6,202,894
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (476.8 shares issued and
outstanding) ............................ 30,558,660 31,098,950
Managing shareholder's accumulated deficit .. (100,484) (95,027)
------------ ------------
Total shareholders' equity ......... 30,458,176 31,003,923
------------ ------------
Total liabilities and
shareholders' equity ............. 41,897,151 $ 43,060,184
------------ ------------
See accompanying notes to consolidated financial statements
Ridgewood Electric Power Trust IV
Consolidated Statement of Operations (unaudited)
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Three Months Ended
--------------------------
March 31, March 31,
1999 1998
----------- -----------
Net sales ................................... $ 1,701,399 $ 1,703,472
Sublease income ............................. 92,250 92,250
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Total revenue ................ 1,793,649 1,795,722
Cost of sales ............................... 1,521,989 1,124,104
----------- -----------
Gross profit ................................ 271,660 671,618
General and administrative expenses ......... 182,631 194,091
Management fee .............................. 116,817 280,071
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Total other operating expenses 299,448 474,162
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(Loss) income from operations ............... (27,788) 197,456
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Other income (expense):
Interest income ....................... 23,572 163,397
Interest expense ...................... (115,103) (129,430)
Income from Maine Hydro Projects ...... 537,135 326,530
Loss from Maine Biomass Projects ...... (168,403) (267,857)
Loss from Santee River Rubber ......... (7,432) --
----------- -----------
Net other income ............. 269,769 92,640
----------- -----------
Income before minority interest ............. 241,981 290,096
Minority interest in the earnings of the
Providence Project .................... (65,303) (140,882)
----------- -----------
Net income .................................. $ 176,678 $ 149,214
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See accompanying notes to the consolidated financial statements
Ridgewood Electric Power Trust IV
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
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Managing
Shareholders Shareholder Total
------------ ------------ ------------
Shareholders' equity, December
31, 1998 .................. $ 31,098,950 $ (95,027) $ 31,003,923
Cash distributions ........... (715,201) (7,224) (722,425)
Net income for the ........... 174,911 1,767 176,678
period
------------ ------------ ------------
Shareholders' equity, March
31, 1999 ............ $ 30,558,660 $ (100,484) $ 30,458,176
------------ ------------ ------------
See accompanying notes to consolidated financial statements
Ridgewood Electric Power Trust IV
Consolidated Statement of Cash Flows (unaudited)
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Three Months Ended
-----------------------------
March 31, 1999 March 31, 1998
------------ ------------
Cash flows from operating activities:
Net income ................................... $ 176,678 $ 149,214
------------ ------------
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization .............. 369,597 242,506
Minority interest in earnings of the
Providence Project ....................... 65,303 140,882
Income from unconsolidated Maine Hydro
Projects ................................. (537,135) (326,530)
Loss from unconsolidated Maine Biomass
Projects ................................. 168,403 267,857
Loss from unconsolidated Santee River
Rubber ................................... 7,432 --
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable, trade ...................... 38,360 (448,061)
Decrease (increase) in other assets ...... 3,456 (45,653)
Decrease in accounts payable
and accrued expenses ................... (131,166) (65,622)
Increase (decrease) in due from
affiliates, net ........................ 99,943 (166,154)
------------ ------------
Total adjustments ...................... 84,193 (400,775)
------------ ------------
Net cash provided by (used in)
operating activities ....................... 260,871 (251,561)
------------ ------------
Cash flows from investing activities:
Loans to Maine Biomass Projects .............. (100,250) (250,000)
Distributions from Santee River Rubber ....... 104,501 --
Capital expenditures ......................... (114,027) (467,559)
Deferred due diligence costs ................. -- (23,346)
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Net cash used in investing activities ...... (109,776) (740,905)
------------ ------------
Cash flows from financing activities:
Cash distributions to shareholders ........... (722,425) (927,453)
Payments to reduce long-term debt ............ (157,110) (142,782)
Increase in debt reserve fund ................ (7,977) --
Distribution to minority interest ............ (129,312) (165,389)
------------ ------------
Net cash used in financing activities ...... (1,016,824) (1,235,624)
------------ ------------
Net decrease in cash and cash equivalents ...... (865,729) (2,228,090)
Cash and cash equivalents, beginning of year ... 2,021,168 11,086,281
------------ ------------
Cash and cash equivalents, end of period ....... $ 1,155,439 $ 8,858,191
------------ ------------
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 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 1998 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. Maine Biomass Projects
In the first quarter of 1999 and April 1999, the Trust loaned $100,250 and
$62,250, respectively, 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
$150,000 in the first quarter of 1999 and $177,000 in April 1999 to the Maine
Biomass Projects with the same terms.
The Maine Biomass Projects were operated by Indeck Operations, Inc., an
affiliate of the members of the Maine Biomass Projects. The annual operator's
fee is $300,000, of which $200,00 is payable contingent upon the Trusts
receiving their cumulative annual return. The management agreement had a term of
one year and automatically continued for successive one year terms, unless
canceled by either the Maine Biomass Projects or Indeck Operations, Inc. The
Maine Biomass Projects exercised their right to terminate the contract on March
1, 1999 because certain preferred membership interest payments have not been
made. Under an Operating Agreement with the Trust, Ridgewood Power Management
Corporation ("Ridgewood Management"), an entity related to the managing
shareholder through common ownership, will provide management, purchasing,
engineering, planning and administrative services to the Maine Biomass Projects.
Ridgewood Management charges the projects at its cost for these services and for
the allocable amount of certain overhead items. Allocations of costs are on the
basis of identifiable direct costs, time records or in proportion to amounts
invested in projects.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are generally 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
Quarter ended March 31, 1999 compared to quarter ended March 31, 1998.
In the first quarter of 1999, the Trust had total revenue of $1,793,000, which
is comparable with total revenue of $1,795,000 in the same period in 1998. Cost
of sales increased to $1,522,000 in the first quarter of 1999 from $1,124,000 in
the same period in 1998 as a result of higher engine maintenance costs at the
Providence Project.
General and administrative expenses in the first quarter of 1999 of $183,000
were comparable with the same period in 1998. The management fee decreased from
$280,000 in the first quarter of 1998 to $117,000 in the same period in 1999
primarily as a result of the Managing Shareholder's decision to voluntarily
waive one-half of its management fee for an indefinite period.
Interest income declined by $140,000 from $164,000 in the first quarter of 1998
to $24,000 in the first quarter of 1998 due to lower average cash balances.
Interest expense was reduced by $14,000 from $129,000 in the first quarter of
1998 to $115,000 in the first quarter of 1999 due to lower borrowings
outstanding at the Providence project.
Equity income from the Maine Hydro Projects increased $210,000 from $327,000 in
the first quarter of 1998 to $537,000 in the same period in 1999 due to higher
production because of above-average river flows. The equity loss from the
shut-down Maine Biomass Projects decreased from $268,000 in the first quarter of
1998 to $168,000 in the same period in 1999 due to cost reductions and sales of
installed capacity at the plants.
Quarter ended March 31, 1998 compared to quarter ended March 31, 1997.
In the first quarter of 1998, the Trust had total revenue of $1,796,000, which
is comparable with total revenue of $1,774,000 in the same period in 1997. Cost
of sales of $1,124,000 in the first quarter of 1998 were also comparable with
the cost of sales of $1,188,000 in the first quarter of 1997.
General and administrative expenses increased by $84,000 from $103,000 in the
first quarter of 1997 to $187,000 in the same period of 1998 primarily because
none of Ridgewood Power Management Corporation's ("RPMC") allocated costs were
capitalized by the Providence Project in 1998. In 1997, a ninth engine was
installed at the Providence Project and certain allocated administrative costs
related to the installation were capitalized. Other operating expenses in the
first quarter of 1997 and 1998 were comparable.
Interest income declined by $86,000 from $249,000 in the first quarter of 1997
to $163,000 in the first quarter of 1998 due to lower average cash balances.
Interest expense was reduced by $38,000 from $167,000 in the first quarter of
1998 to $129,000 in the first quarter of 1999 due to lower borrowings
outstanding oat the Providence Project.
Equity income from the Maine Hydro Projects increased $100,000 from $227,000 in
the first quarter of 1997 to $327,000 in the same period in 1998 due to the
improved results of the Maine Hydro Projects which is primarily a result of
higher production because of above-average river flows. The Trust recorded an
equity loss of $268,000 in the first quarter of 1998 from the temporarily
shut-down Maine Biomass Projects. These projects were acquired in July 1997.
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. There have been no borrowings under the line
of credit in 1999.
The Managing Shareholder announced a change of distribution policy in May 1999.
Distributions to Investors from the Trust, which had been made on a monthly
basis, will be made on a quarterly basis going forward in order to reduce
administrative burdens.
In addition, the Managing Shareholder is reducing the Trust's distribution rate
per share to $1,000 per quarter, equal to a 4% distribution rate per year. The
rate paid in 1998 was 6% per year. The reduction is expected to continue at
least into early 2000. The Managing Shareholder also has voluntarily waived
one-half of its management fee (approximately $39,000 per month) beginning in
January 1999. The Managing Shareholder is not obligated to continue the waiver
and may end it at any time in its sole discretion. The Trust anticipates that
the Santee River and Maine Biomass plants will begin to make significant
contributions to cash flow in mid- to-late 2000, which might permit an increase
in distributions at that time. However, the Trust cannot assure that these
results will occur or that the distribution rate will be maintained or
increased.
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.
The Trust anticipates that, during 1999, its cash flow from operations,
unexpended offering proceeds and line of credit facility will be adequate to
fund its obligations.
Year 2000 remediation
Please refer to the Trust's disclosures at Item 7 - Management's Discussion and
Analysis of its Annual Report on Form 10-K for 1998 for a discussion of year
2000 issues affecting the Trust. Since that report was filed, the only material
change in the Trust's year 2000 compliance is that the changes to the Managing
Shareholder's investor distribution system have been completed. Testing of those
changes has been rescheduled to late May 1999 in conjunction with a regularly
scheduled set of distributions. No other material changes in the Trust's
remediation efforts or its plans for year 2000 compliance have occurred.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in the Trust's Annual Report on Form 10-K for 1998,
Ridgewood/Providence Power Partners, L.P. ("RPPP"), a limited partnership
through which the Trust owns its limited partnership interest in the Providence
Project, is a defendant before Region I office of the U.S. Environmental
Protection Agency ("EPA")in an administrative proceeding to recover civil
penalties of up to $190,000 for alleged violations of operational recordkeeping
and training requirements at the Providence Project. Discussions are continuing
with EPA with regard to a settlement of the civil penalties for approximately
one-half of the original demand and for offset, in EPA's discretion, of a
portion of the penalties against future environmental improvements to be made by
the Trust. 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 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 5. Other Information
Ridgewood Power Corporation has been the managing shareholder of the Trust. It
organized the Trust and acted as managing shareholder until April 1999. On or
about April 20, 1999 it was merged into Ridgewood Power LLC, a New Jersey
limited liability company, which thus became the Managing Shareholder of the
Trust. Ridgewood Power LLC was organized in early April 1999 and has no business
other than acting as the successor to Ridgewood Power Corporation. No material
change in the Trust's operations or business will result from the merger.
Robert E. Swanson has been the President, sole director and sole stockholder of
Ridgewood Power Corporation since its inception in February 1991 and is now the
controlling member, sole manager and President of the Managing Shareholder. Mr.
Swanson currently is the sole equity owner of the Managing Shareholder but is
considering a transfer of 53% of the equity ownership to two family trusts. If
that transfer is made, he will have the power on behalf of those trusts to vote
or dispose of the membership equity interests owned by them and accordingly will
continue to have sole control of the Managing Shareholder. Further, Mr. Swanson
is designated as the sole manager of the Managing Shareholder in its operating
agreement.
Ridgewood Power LLC is also the managing shareholder of the other five business
trusts organized by Ridgewood Power Corporation to participate in the
independent electric power industry.
Similarly, Ridgewood Power Management Corporation, which operates certain
Projects on behalf of the Trust, was merged on or about April 20, 1999 into a
new New Jersey limited liability company, Ridgewood Power Management LLC. The
ownership and control of Ridgewood Power Management LLC are the same as those of
Ridgewood Power LLC and its only business is to be the successor to Ridgewood
Power Management Corporation. No material change in the operation of the
Projects is expected as a result of that merger.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
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
May 17, 1999 By /s/ Martin V. Quinn
Date Martin V. Quinn
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)