FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OFTHE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 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
September 30, 1999
Ridgewood Electric Power Trust IV
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
September 30, December 31,
1999 1998
------------ ------------
(unaudited)
Assets:
Cash and cash equivalents ................... $ 666,692 $ 2,021,168
Accounts receivable, trade .................. 1,170,381 617,973
Due from affiliates ......................... 133,933 377,710
Other assets ................................ 138,355 57,975
------------ ------------
Total current assets ...................... 2,109,361 3,074,826
------------ ------------
Investments:
Maine Hydro Projects ........................ 6,277,163 6,217,289
Maine Biomass Projects ...................... 5,865,602 6,306,818
Santee River Rubber ......................... 4,264,512 4,501,357
Electric power equipment held for resale .... 455,182 455,182
Plant and equipment ......................... 16,761,288 16,359,211
Accumulated depreciation .................... (2,765,634) (2,073,744)
------------ ------------
13,995,654 14,285,467
------------ ------------
Electric power sales contract ............... 8,338,040 8,338,040
Accumulated amortization .................... (1,918,979) (1,502,081)
------------ ------------
6,419,061 6,835,959
------------ ------------
Spare parts inventory ....................... 746,178 746,178
Debt reserve fund ........................... 657,987 637,108
------------ ------------
Total assets .............................. $ 40,790,700 $ 43,060,184
------------ ------------
Liabilities and Shareholders' Equity:
Liabilities:
Current maturities of long-term debt ........ $ 700,058 $ 651,613
Accounts payable and accrued expenses ....... 447,622 563,685
Due to affiliates ........................... 695,053 441,614
------------ ------------
Total current liabilities ................. 1,842,733 1,656,912
Long-term debt, less current portion ........ 3,665,186 4,196,455
Minority interest in the Providence Project . 5,988,840 6,202,894
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (476.8 shares issued and
outstanding) ............................ 29,406,067 31,098,950
Managing shareholder's accumulated deficit .. (112,126) (95,027)
------------ ------------
Total shareholders' equity ................ 29,293,941 31,003,923
------------ ------------
Total liabilities and shareholders' equity $ 40,790,700 $ 43,060,184
------------ ------------
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,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net sales .......... $ 5,325,510 $ 5,123,329 $ 1,838,601 $ 1,692,142
Sublease income .... 276,750 276,750 92,250 92,250
----------- ----------- ----------- -----------
Total revenues ... 5,602,260 5,400,079 1,930,851 1,784,392
Cost of sales ...... 4,608,550 3,618,948 1,522,499 1,208,045
----------- ----------- ----------- -----------
Gross profit ....... 993,710 1,781,131 408,352 576,347
General and
administrative
expenses .......... 503,598 502,766 152,149 160,971
Management fee ..... 350,451 840,213 116,817 280,071
Project due
diligence costs ... -- 230,809 -- 211,640
Other expenses ..... 15,036 10,983 10,256 8,055
----------- ----------- ----------- -----------
Total other
operating expenses 869,085 1,584,771 279,222 660,737
----------- ----------- ----------- -----------
Income (loss) from
operations ........ 124,625 196,360 129,130 (84,390)
----------- ----------- ----------- -----------
Other income
(expense):
Interest income .... 142,450 329,150 96,874 52,896
Interest expense ... (333,816) (377,844) (107,410) (122,438)
Income (loss) from
Maine Hydro
Projects .......... 459,874 583,737 (194,787) (103,803)
Loss from Maine
Biomass Projects .. (666,216) (434,502) (255,719) (123,469)
Income from Santee
River Rubber ...... 104,583 -- 40,748 --
----------- ----------- ----------- -----------
Net other income
(loss) ............ (293,125) 100,541 (420,294) (296,814)
----------- ----------- ----------- -----------
Income (loss) before
minority interest . (168,500) 296,901 (291,164) (381,204)
Minority interest
in the earnings of
the Providence
Project ........... (144,443) (359,212) (60,991) (109,141)
----------- ----------- ----------- -----------
Net income (loss) .. $ (312,943) $ (62,311) $ (352,155) $ (490,345)
----------- ----------- ----------- -----------
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, 1998 .. $ 31,098,950 $ (95,027) $ 31,003,923
Cash distributions .. (1,383,069) (13,970) (1,397,039)
Net loss for the
period ............. (309,814) (3,129) (312,943)
------------ ------------ ------------
Shareholders' equity,
September 30, 1999 . $ 29,406,067 $ (112,126) $ 29,293,941
------------ ------------ ------------
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,
1999 1998
------------ ------------
Cash flows from operating activities:
Net loss .................................... $ (312,943) $ (62,311)
------------ ------------
Adjustments to reconcile net
loss to net cash flows from
operating activities:
Depreciation and amortization .............. 1,108,788 950,626
Minority interest in earnings of
the Providence Project .................... 144,443 359,212
Loss from unconsolidated Maine
Hydro Projects ............................ (459,874) (583,737)
Loss from unconsolidated Maine
Biomass Projects .......................... 666,216 434,502
Income from unconsolidated Santee
River Rubber .............................. (104,583) --
Changes in assets and liabilities:
Increase in accounts receivable,
trade ..................................... (552,408) (459,911)
Decrease (increase) in due from
affiliates ................................ 243,777 (34,770)
Increase in other assets ................... (80,380) (68,641)
Decrease in accounts payable and
accrued expenses .......................... (116,063) (10,083)
Increase (decrease) in due to
affiliates ................................ 253,439 (244,128)
------------ ------------
Total adjustments ....................... 1,103,355 343,070
------------ ------------
Net cash provided by operating activities 790,412 280,759
------------ ------------
Cash flows from investing activities:
Investment in Santee River Project .......... -- (4,469,650)
Loans to Maine Biomass Projects ............. (225,000) (250,000)
Distributions from Maine Hydro Projects ..... 400,000 299,999
Distributions from Santee River Rubber ...... 341,428 --
Capital expenditures ........................ (402,077) (1,460,541)
Deferred due diligence costs ................ -- 27,159
------------ ------------
Net cash provided by (used in)
investing activities ................... 114,351 (5,853,033)
------------ ------------
Cash flows from financing activities:
Cash distributions to shareholders .......... (1,397,039) (2,694,924)
Payments to reduce long-term debt ........... (482,824) (438,794)
Increase in debt reserve fund ............... (20,879) --
Distribution to minority interest ........... (358,497) (532,102)
------------ ------------
Net cash used in financing activities ... (2,259,239) (3,665,820)
------------ ------------
Net decrease in cash and cash equivalents ... (1,354,476) (9,238,094)
Cash and cash equivalents, beginning of year 2,021,168 11,086,281
------------ ------------
Cash and cash equivalents, end of period .... $ 666,692 $ 1,848,187
------------ ------------
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. The year-end balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. 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 six months of 1999, the Trust loaned an additional $225,000 to
Indeck Maine Energy, L.L.C. ("Maine Biomass Projects"). At September 30, 1999,
the total amount loaned by the Trust was $600,000 and is recorded as an increase
to the trust's investment in the Maine Biomass Projects. The loan is in the form
of 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 $450,000 in the first six months
of 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 $200,000 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 of March
1, 1999 because certain preferred membership interest payments have not been
made. Under an Operating Agreement with the Trust, Ridgewood Power Management
LLC ("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
3. Providence EPA Matter
In June 1999, Ridgewood Providence Power Partners, L.P. ("RPPP"), a limited
partnership through which the Trust owns its limited partnership interest in the
Providence Project, settled the administrative proceeding brought by the Region
I office of the U.S. Environmental Protection Agency ("EPA") for approximately
$86,000. As previously disclosed the charges related to alleged recordkeeping,
training documentation and tank labeling violations and did not relate to any
discharge of pollutants or direct danger to the environment.
4. 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,
1999 1998
Total revenue ............... $3,195,185 $3,580,482
Depreciation and amortization 829,079 817,200
Income from operations ...... 973,485 1,141,168
Net income .................. 919,748 1,167,472
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,
1999 1998
Total revenue ............... $ 925,326 $ 1,198,098
Depreciation and amortization 135,623 135,623
Loss from operations ........ (1,260,333) (837,629)
Net loss .................... (1,332,431) (869,004)
Summary results of operations for the Santee River Rubber project, which is
accounted for under the equity method, were as follows:
Nine months ended September 30, 1999
Total revenue ............... $ --
Depreciation and amortization --
Net loss .................... (1,080,000)
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
In the third quarter of 1999, the Trust had total revenue of $1,931,000, which
is comparable with total revenue of $1,784,000 in the same period in 1998. Total
revenues for the first nine months of 1999 of $5,602,000 were also comparable
with total revenue of $5,400,000 in the same period in 1998. Cost of sales
increased to $1,522,000 in the third quarter of 1999 ($4,609,000 in the first
nine months of 1999) from $1,208,000 in the same period in 1998 ($3,619,000 in
the first nine months of 1998) as a result of higher engine maintenance costs at
the Providence Project. A portion of the increase in maintenance costs resulted
from an engine failure in the first quarter of 1999.
General and administrative expenses in the third quarter of 1999 of $152,000
were comparable with the $161,000 recorded in the same period in 1998. General
and administrative expenses for the first nine months of 1999 of $504,000 were
comparable with the $503,000 recorded in the same period in 1998. The management
fee decreased from $280,000 in the third quarter of 1998 ($840,000 in the first
nine months of 1998) to $117,000 in the same period in 1999 ($350,000 in the
first nine months of 1999) as a result of the Managing Shareholder's decision to
voluntarily waive one-half of its management fee. The Managing Shareholder will
resume taking the full fee in the fourth quarter of 1999.
Interest income declined by $187,000 from $329,000 in the first nine months of
1998 to $142,000 in the same period of 1999 due to the lower average cash
balances. Interest expense was reduced from $122,000 in the third quarter of
1998 ($378,000 for the first nine months of 1998) to $107,000 in the third
quarter of 1999 ($334,000 for the first nine months of 1999) due to lower
borrowings outstanding at the Providence Project.
The equity loss from the Maine Hydro Projects increased from $104,000 in the
third quarter of 1998 to $195,000 in the same period in 1999 due to lower
production because of below-average river flows. The below-average river flows
also reduced equity income for the first nine months of 1999 ($460,000 for the
first nine months of 1999 compared to $584,000 for the first nine months of
1998).
The equity loss from the shut-down Maine Biomass Projects increased from
$123,000 in the third quarter of 1998 ($435,000 for the first nine months of
1998) to $256,000 in the third quarter of 1999 ($666,000 for the first nine
months of 1999) due to lower revenues from the sale of installed capacity at the
plants and additional costs incurred to prepare the plants for limited
operations.
The Trust recorded income from its equity interest in the Santee River Rubber
project of $41,000 and $105,000 in the third quarter and first nine months of
1999, respectively. The Trust acquired its investment in Santee River Rubber in
the third quarter of 1998. The Santee River Rubber project is expected to begin
operations in the last quarter of 1999.
The decrease in the minority interest in the earnings of the Providence Project
from $109,000 in the third quarter of 1998 ($359,000 for the first nine months
of 1998) to $61,000 in the second quarter of 1999 ($144,000 for the first nine
months of 1999) is a result of lower earnings from the Providence Project caused
primarily by higher 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. 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, are now made on a quarterly basis in order to reduce administrative
burdens.
In addition, the Managing Shareholder reduced 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 was not obligated to continue the waiver and it
ended in the fourth quarter of 1999. 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 in its Annual Report on Form 10-K for
the year ended December 31, 1998, at "Item 7 - Management's Discussion and
Analysis," for a discussion of year 2000 issues affecting the Trust. In October
1999, the Managing Shareholder completed its year 2000 remediation program after
having successfully tested and implemented all necessary changes to its
software, including the subscription/investor relations systems and all
subsystems used for preparing internal reports. Costs of remediation did not
materially exceed the estimated amounts.
The Trust's projects have been reviewed by an outside consultant or by personnel
from RPMCo, who determined that the project's electronic control systems do not
contain software affected by the Year 2000 problem and do not contain embedded
components that contain Year 2000 flaws.
No other material changes to the risks to the Trust described in its Annual
Report on Form 10-K have occurred. The reasonable worst case scenario
anticipated by the Trust continues to be that its electric generating facilities
will be able to operate on and after January 1, 2000 but that there may be some
short-term inability of their customers to pay promptly. In that event, the
Trust's revenues could be materially reduced for a temporary period and it might
have to draw upon its credit line to fund operating expenses until the utility
makes up any payment arrears.
PART II - OTHER INFORMATION
Item 5. Other Information
Mr. Swanson has transferred 54% of the equity interest in the Managing
Shareholder to family trusts. He has sole dispositive and voting power over the
equity interest transferred to each trust and accordingly continues to be the
beneficial owner as defined in Rule 13d-3 of all of the equity interest in the
Managing Shareholder.
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 11, 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)