<PAGE> 1
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
CRSS INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for
the year ended June 30, 1993 as set forth in the pages attached hereto:
Item 14(a)1. Financial Statements:
Financial statements of Hopewell Cogeneration Limited Partnership and
Naheola Cogeneration Limited Partnership (unconsolidated affiliates) as
of December 31, 1993 and December 26, 1993, respectively.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CRSS INC.
_________________________________
(Registrant)
By /s/ BRUCE W. WILKINSON
______________________________
Bruce W. Wilkinson
President and Chief Executive Officer
Date: March 30, 1994
<PAGE> 2
FINANCIAL STATEMENTS
HOPEWELL CORPORATION LIMITED PARTNERSHIP
Years Ended December 31, 1993 and 1992
<PAGE> 3
HOPEWELL COGENERATION LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
Years ended December 31, 1993 and 1992
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . 1
Audited Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . . . . . . 3
Statements of Partners' Capital. . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
Partners
Hopewell Cogeneration Limited
Partnership
We have audited the accompanying balance sheets of Hopewell
Cogeneration Limited Partnership (Partnership) as of
December 31, 1993 and 1992, and the related statements of
income, partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Hopewell Cogeneration Limited Partnership at
December 31, 1993 and 1992, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
January 20, 1994 ERNST & YOUNG
1
<PAGE> 5
HOPEWELL COGENERATION LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1993 1992
---- ----
<S> <C> <C>
Assets (Note 4)
Current assets:
Cash and cash equivalents $ 8,365,721 $ 6,045,459
Accounts receivable (Note 5) 4,807,430 6,138,642
Fuel oil inventory 2,228,470 2,239,753
Prepaid expenses 211,210 248,372
------------ ------------
Total current assets 15,612,831 14,672,226
Property, plant, and equipment (Note 2) 170,432,257 175,583,398
------------ ------------
Total assets $186,045,088 $190,255,624
============ ============
Liabilities and partners' capital
Current liabilities:
Accounts payable (Note 5) $ 542,663 $ 184,314
Accrued expenses (Note 5) 6,474,771 6,246,060
Current portion of long-term debt (Note 4) 7,245,479 6,523,955
------------ ------------
Total current liabilities 14,262,913 12,954,329
Long-term debt (Note 4) 150,396,606 157,642,085
------------ ------------
Total liabilities 164,659,519 170,596,414
Partners' capital 21,385,569 19,659,210
------------ ------------
Total liabilities and partners' capital $186,045,088 $190,255,624
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 6
HOPEWELL COGENERATION LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31
1993 1992
----------- -----------
<S> <C> <C>
Revenue (Note 1) $53,441,221 $55,392,606
Operating expenses (Note 5) 12,812,274 18,456,628
----------- -----------
Gross margin 40,628,947 36,935,978
General overhead expenses (Note 5) 2,460,085 2,491,093
----------- -----------
Earnings before interest and
depreciation 38,168,862 34,444,885
Interest expense, net of interest
income of $257,606 and $229,751
in 1993 and 1992, respectively 18,777,236 19,719,175
Depreciation 6,362,332 6,338,246
----------- -----------
Net income $13,029,294 $ 8,387,464
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 7
HOPEWELL COGENERATION LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
American Total
National Prince Partners'
CRSSH Power George HCI Capital
----------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $13,884,554 $6,942,278 $6,942,278 $280,496 $28,049,606
Partnership distributions (8,305,041) (4,152,520) (4,152,520) (167,779) (16,777,860)
Allocated net income 4,151,795 2,075,897 2,075,897 83,875 8,387,464
----------- ---------- ---------- -------- -----------
Balance at December 31, 1992 9,731,308 4,865,655 4,865,655 196,592 19,659,210
Partnership distributions (5,594,953) (2,797,476) (2,797,476) (113,030) (11,302,935)
Allocated net income 6,449,501 3,224,750 3,224,750 130,293 13,029,294
----------- ---------- ---------- -------- -----------
Balance at December 31, 1993 $10,585,856 $5,292,929 $5,292,929 $213,855 $21,385,569
=========== ========== ========== ======== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 8
HOPEWELL COGENERATION LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
1993 1992
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $13,029,294 $ 8,387,464
Adjustments to reconcile net cash
provided by operating
activities:
Depreciation and
amortization 6,362,332 6,338,246
Changes in operating assets
and liabilities:
Decrease in receivables 1,331,212 664,766
Decrease in fuel oil
inventory 11,283 713,186
Decrease in prepaid
expenses 37,162 51,037
Increase (decrease) in
accounts payable 358,349 (31,599)
Increase in accrued
expenses 228,711 615,155
----------- -----------
Net cash provided by operating
activities 21,358,343 16,738,255
INVESTING ACTIVITIES
Purchases of property, plant,
and equipment (1,211,191) (894,115)
----------- -----------
Net cash used in investing
activities (1,211,191) (894,115)
FINANCING ACTIVITIES
Payments on long-term debt (6,523,955) (5,900,421)
Partnership distributions (11,302,935) (16,777,860)
----------- -----------
Net cash used in financing
activities (17,826,890) (22,678,281)
----------- -----------
Increase (decrease) in cash and
cash equivalents 2,320,262 (6,834,141)
Cash and cash equivalents at
beginning of year 6,045,459 12,879,600
----------- -----------
Cash and cash equivalents at
end of year $ 8,365,721 $ 6,045,459
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 9
HOPEWELL COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
Hopewell Cogeneration Limited Partnership (the Partnership),
a Delaware limited partnership, was established to develop,
own, and operate a combined-cycle cogeneration facility in
Hopewell, Virginia (the Facility). The Facility will sell,
under long-term contracts, up to 356,000 kilowatts per hour
of net electrical output to Virginia Electric and Power
Company (VEPCO) and up to 300,000 pounds per hour of process
steam to the Aqualon Company as a Qualifying Facility under
the Public Utilities Regulatory Policies Act of 1978. The
Facility has the capability of using either natural gas or
#2 distillate oil as its fuel source.
OWNERSHIP
Hopewell Cogeneration, Inc. (HCI), the general partner, has
a 1% interest in the Partnership. When the Partnership was
originally formed, HCI was jointly owned by CRSS Capital,
Inc. (CRSSC), a majority-owned subsidiary of CRSS, Inc.
(CRSS), and Transco Power Company, a wholly owned subsidiary
of Transco Energy Company (Transco). CRSS Hopewell
Cogeneration, Inc. (CRSSH), a wholly owned subsidiary of
CRSSC, and Transco Energy Ventures Company (TEVCO), a wholly
owned subsidiary of Transco, were limited partners, each
with a 49.5% interest at Partnership inception. On May 12,
1989, the Limited Partnership Agreement was amended and
restated to reflect the purchase of 50% of Transco's
interest in the Partnership by Prince George Energy Company
(Prince George). Prince George entered into the Partnership
with a 24.75% limited partner interest and a .25% general
partner interest. Late in 1993, Transco sold its interests
in the Partnership through the sale of TEVCO to American
National Power. Each partner shares in net income or loss
based on their respective ownership percentages. Additional
capital contributions are not required beyond the financing
term date (see Note 4) and can only be requested through
unanimous consent of all partners.
REPAIR AND MAINTENANCE COSTS
The plant is scheduled for periodic maintenance in future
periods. Estimates are made as to when the costs will be
incurred and the amount. These costs are accrued ratably
over the estimated period. The amounts included in accrued
expenses for scheduled repair and maintenance are $3,872,000
and $4,604,000 as of December 31, 1993 and 1992,
respectively.
6
<PAGE> 10
HOPEWELL COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Partnership considers all investments with maturities of
three months or less when purchased to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost (on a first-in,
first-out basis) or market.
2. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost and
include direct construction costs, financing costs,
interest, and other costs associated with readying the
Facility for operation. Net interest capitalized consists of
actual interest expenditures reduced by investment interest
income. Plant, equipment, and capitalized interest are being
depreciated using the straight-line method over the
estimated useful life of the Facility (30 years).
The components of property, plant, and equipment are as
follows:
<TABLE>
<CAPTION>
December 31
1993 1992
------------ ------------
<S> <C> <C>
Land $ 2,073,981 $ 2,073,981
Plant and equipment 170,472,399 169,261,208
Capitalized interest 19,742,619 19,742,619
------------ ------------
192,288,999 191,077,808
Less accumulated depreciation 21,856,742 15,494,410
------------ ------------
$170,432,257 $175,583,398
</TABLE> ============ ============
3. FEDERAL INCOME TAX
The Partnership has not recorded income taxes as it is
organized as such for federal income tax purposes.
Accordingly, tax liabilities are liabilities of the
individual partners.
7
<PAGE> 11
HOPEWELL COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
4. LONG-TERM DEBT
Financing for the Facility is being provided by a consortium
of banks through a combination of Base, Eurodollar, and CD
rate loans and through the sale of commercial paper. The
commercial paper program is backed by an irrevocable letter
of credit not to exceed the balance of the outstanding debt.
The Partnership pays fees on the Base, Eurodollar, and CD
rate loans as follows:
<TABLE>
<CAPTION>
Eurodollar
Base Rate Rate CD Rate
<S> <C> <C> <C>
July 29, 1988 through July 31, 1993 .250% .750% .875%
August 1, 1993 through July 31, 1996 .375% .875% 1.000%
August 1, 1996 through July 31, 1999 .500% 1.000% 1.125%
August 1, 1999 through July 31, 2002 .625% 1.125% 1.250%
August 1, 2002 and thereafter .750% 1.250% 1.375%
</TABLE>
The partnership pays fees on the letter of credit as
follows:
<TABLE>
<S> <C>
July 29, 1988 through July 31, 1993 .625%
August 1, 1993 through July 31, 1996 .750%
August 1, 1996 through July 31, 1999 .875%
August 1, 1999 through July 31, 2002 1.000%
August 1, 2002 and thereafter 1.125%
</TABLE>
Under the terms of a swap agreement, the Partnership pays a
fixed interest rate of 10.56% on a notional amount which was
$7.2 million higher than the original amount borrowed. This
leads to an effective interest rate that is higher than the
stated rate. This notional amount decreases ratably over the
term of the financing, which expires June 30, 2005.
Interest paid in 1993 and 1992 was $19,041,549 and
$20,282,000, respectively.
8
<PAGE> 12
HOPEWELL COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
4. LONG-TERM DEBT (CONTINUED)
The loan balance as of December 31, 1993 consists of the
following:
<TABLE>
<CAPTION>
Amount Maturity Date Type
- ------------
<S> <C> <C>
$123,275,000 March 9, 1994 Eurodollar rate loans
34,367,085 March 31, 1994 Eurodollar rate loans
- ------------
$157,642,085
============
</TABLE>
In accordance with the financing agreement, the loans
outstanding at year-end will be continuously rolled over
throughout the term of the financing. Future minimum
principal payments are as follows:
<TABLE>
<S> <C>
1994 $ 7,245,479
1995 8,040,451
1996 8,917,512
1997 9,880,984
1998 10,956,788
Thereafter 112,600,871
------------
$157,642,085
============
</TABLE>
Pursuant to the terms of the financing agreement, the
Partnership had restricted cash of $4,285,000 at
December 31, 1993 and $2,475,000 at December 31, 1992 to be
used for repair and maintenance costs.
Partnership assets are pledged as collateral on the loan.
5. RELATED PARTY TRANSACTIONS
CRSSC provides administrative and management services to the
Partnership for which approximately $630,000 and $460,000
were paid during 1993 and 1992, respectively.
CRSS Hopewell Operations, Inc. (CRSSOP), a wholly owned
subsidiary of CRSSC, provides operations and maintenance
services to the Partnership. During 1993 and 1992, the
Partnership paid approximately $2,250,000 and $2,146,000,
respectively, for these services.
9
<PAGE> 13
HOPEWELL COGENERATION LIMITED PART
NOTES TO FINANCIAL STATEMENTS
5. RELATED PARTY TRANSACTIONS (CONTINUED)
CRS Sirrine Engineers, Inc., a wholly owned subsidiary of
CRSS, provides engineering services to the Partnership.
During 1993 and 1992, the Partnership paid approximately
$700 and $30,000, respectively, for these services.
TEVCO provides fuel procurement and fuel management services
to the Partnership for which approximately $213,000 and
$221,000 was paid during 1993 and 1992, respectively.
Transco Energy Marketing Co. (TEMCO), a wholly owned
subsidiary of Transco, provides fuel to the Facility under
an amended fuel supply agreement dated August 31, 1989.
Under this agreement, the Partnership paid TEMCO
approximately $7,521,000 and $11,057,000 in 1993 and 1992,
respectively, for fuel purchases including reimbursement by
TEMCO to the Partnership of $39,000 per month plus $.004 per
MMBtu of natural gas delivered each month in consideration
of the Partnership constructing certain equipment at the
Facility on behalf of TEMCO.
The Partnership had accounts payable and accrued expenses to
related parties as follows:
<TABLE>
<CAPTION>
December 31
1993 1992
-------- --------
<S> <C> <C>
TEMCO $340,000 $350,000
CRSSC 35,000 35,000
CRSSOP 433,000 172,838
</TABLE>
The Partnership had accounts receivable from related parties
as follows:
<TABLE>
<S> <C> <C>
Hopewell Cogeneration Inc. $46,000 $ --
CRSSOP 78,000 --
</TABLE>
10
<PAGE> 14
FINANCIAL STATEMENTS
NAHEOLA COGENERATION LIMITED PARTNERSHIP
Year Ended December 26, 1993
<PAGE> 15
NAHEOLA COGENERATION LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
Year ended December 26, 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . 1
Audited Financial Statements
Balance Sheet . . . . . . . . . . . . . . . . 2
Statement of Income . . . . . . . . . . . . 3
Statement of Partners' Capital . . . . . . . 4
Statement of Cash Flows . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . 6
</TABLE>
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Naheola Cogeneration Limited Partnership
We have audited the accompanying balance sheet of Naheola
Cogeneration Limited Partnership ("Partnership") as of
December 26, 1993, and the related statements of income,
partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the finan-
cial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Naheola Cogeneration Limited Partnership at
December 26, 1993, and the results of its operation and its
cash flows for the year then ended, in conformity with
generally accepted accounting principles.
January 20, 1994, ERNST & YOUNG
except for Note 4 as to which the date is
March 4, 1994
1
<PAGE> 17
NAHEOLA COGENERATION LIMITED PARTNERSHIP
BALANCE SHEET
December 26, 1993
<TABLE>
<S> <C>
ASSETS (Note 4)
Current assets:
Cash and cash equivalents $ 22,440,817
Restricted cash -- operator reserve (Note 5) 4,655,550
Accounts receivable (Note 7) 3,506,210
Prepaid expenses 56,250
------------
Total current assets 30,658,827
Plant and equipment (Note 2) 254,309,276
Other assets, net 2,986,110
------------
Total assets $287,954,213
============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses (Note 6) $ 8,518,007
Payable to partner (Note 7) 273,000
Current portion of debt (Note 4) 8,700,000
------------
Total current liabilities 17,491,007
Operator reserve (Note 5) 4,655,550
Debt (Note 4) 197,020,000
------------
Total liabilities 219,166,557
Partners' capital 68,787,656
------------
Total liabilities and partners' capital $287,954,213
============
</TABLE>
See accompanying notes.
2
<PAGE> 18
NAHEOLA COGENERATION LIMITED PARTNERSHIP
STATEMENT OF INCOME
Year ended December 26, 1993
<TABLE>
<S> <C>
Revenue (Note 7) $51,833,479
Operating expenses (Note 7) 14,933,987
-----------
Gross margin 36,899,492
General and administrative expenses (Note 7) 971,458
-----------
Income before interest, depreciation, and
amortization 35,928,034
Interest expense, net of interest income of
$268,245 16,905,048
Depreciation and amortization 10,245,330
-----------
Net income $ 8,777,656
===========
</TABLE>
See accompanying notes.
3
<PAGE> 19
NAHEOLA COGENERATION LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
<TABLE>
<CAPTION> Total
Partners'
JRP CNLP NCI Capital
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Balance at December 27, 1992 $29,704,950 $ 4,950 $300,100 $30,010,000
Additional contribution -- July 1, 1993 -- 29,700,000 300,000 30,000,000
Net income for the year ended
December 26, 1993 4,344,940 4,344,940 87,776 8,777,656
----------- ----------- -------- -----------
Balance at December 26, 1993 $34,049,890 $34,049,890 $687,876 $68,787,656
=========== =========== ======== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 20
NAHEOLA COGENERATION LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
Year ended December 26, 1993
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 8,777,656
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,245,330
Changes in operating assets and liabilities:
Increase in accounts receivable (3,506,210)
Increase in prepaid expenses (56,250)
Increase in accounts payable and accrued expenses 2,615,350
------------
Net cash provided by operating activities 18,075,876
INVESTING ACTIVITIES
Purchases of plant and equipment (30,098,882)
------------
Net cash used in investing activities (30,098,882)
FINANCING ACTIVITIES
Proceeds from construction loan 34,220,000
Payments on construction loan (30,000,000)
Partners' contribution 30,000,000
-----------
Net cash provided by financing activities 34,220,000
-----------
Increase in cash and cash equivalents 22,196,994
Cash and cash equivalents at beginning of year 243,823
-----------
Cash and cash equivalents at end of year $22,440,817
===========
</TABLE>
See accompanying notes.
5
<PAGE> 21
NAHEOLA COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 26, 1993
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
Naheola Cogeneration Limited Partnership (the
"Partnership"), a Delaware limited partnership, was
established to develop, own, and operate a chemical recovery
unit facility (the "Facility") at the Naheola Mill (the
"Mill") of James River Pennington, Inc., in Pennington,
Alabama. The Facility provides, under a long-term contract,
Black Liquor Solids ("BLS") processing, steam, and
compressed air requirements of the Mill, and approximately
60% of the Mill's electricity requirements.
OWNERSHIP
Naheola Cogeneration, Inc. ("NCI"), the general partner, has
a 1% interest in the Partnership. NCI is jointly owned by
Capital Naheola Cogenerators, Inc., a subsidiary of CRSS
Capital, Inc. ("CRSSC"), and James River Pennington, Inc.
("JRP"), a subsidiary of James River Corporation. Capital
Naheola Limited Partnership ("CNLP") and JRP are limited
partners, each with a 49.5% interest. CNLP is jointly owned
by CRSS Naheola, Inc. ("CRSSN"), as general partner and
Naheola Power Inc. ("NPI"), as limited partner. Both CRSSN
and NPI are subsidiaries of CRSSC.
The Partnership has contracted with CRSSC and JRP for
services as more fully discussed in Note 7.
DEVELOPMENT STAGE ENTERPRISE
Upon substantial completion of construction, as defined in
the turnkey contract, the Facility underwent a series of
performance tests with a final acceptance date by the
Partnership of March 16, 1993. The Facility was in the
development and testing stage until that date. The Statement
of Operations represents operations from that date. All
costs related to testing the Facility and readying the plant
for operation prior to March 16, 1993 are capitalized and
are being depreciated over the life of the plant (20 years).
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents.
6
<PAGE> 22
NAHEOLA COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets consist of loan origination costs of $3,102,452
net of accumulated amortization of $16,342. These costs are
being amortized over the term of the loan agreement (20
years).
2. PLANT AND EQUIPMENT
Plant and equipment includes contributed assets (see
Note 7), direct construction costs incurred, financing costs
and interest, net of interest income, and other costs
associated with readying the Facility for operation.
Contributed assets were recorded at their fair market value
as of March 14, 1991. Plant, equipment, and capitalized
interest are being depreciated using the straight-line
method over the estimated useful life of the Facility
(20 years).
The components of plant and equipment are as follows:
<TABLE>
<CAPTION>
December 26, 1993
-----------------
<S> <C>
Plant and equipment $240,940,467
Capitalized interest 21,722,396
------------
262,662,863
Less accumulated depreciation 10,128,988
------------
252,533,875
Construction in progress 1,775,401
------------
$254,309,276
============
</TABLE>
3. FEDERAL INCOME TAX
The Partnership is organized as such for federal and state
income tax purposes. Accordingly, tax liabilities are
liabilities of the individual partners.
7
<PAGE> 23
NAHEOLA COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEBT
Financing is being provided by Taxable Industrial Revenue
Bonds issued by the Industrial Development Board of the City
of Butler, Alabama.
Interest on the bond financing is paid through a combination
of Base rate, CD rate, and Eurodollar rate elections. The
Partnership makes an interest rate election periodically and
pays fees on the combination of amounts and rates chosen as
follows:
<TABLE>
<CAPTION> Eurodollar
Base Rate CD Rate Rate
--------- ------- ----------
<S> <C> <C> <C>
March 14, 1991 through March 14, 1996 .20% 1.125% 1.00%
March 15, 1996 through March 14, 2001 .35% 1.225% 1.10%
March 15, 2001 through March 31, 2006 .50% 1.375% 1.25%
</TABLE>
Under the terms of a swap agreement with a consortium of
banks, the Partnership has agreed to pay the difference
between the average Eurodollar rate and a fixed rate each
quarter over the term of the financing, which expires
March 31, 2006. The fixed rate escalates over the term of
the Agreement as follows:
<TABLE>
<S> <C>
March 14, 1991 thru March 31, 1996 8.86%
April 1, 1996 thru March 31, 1997 8.91%
April 1, 1997 thru March 31, 2001 9.38%
April 1, 2001 and thereafter 9.48%
</TABLE>
The bond agreement contains provisions to convert the
advances to term financing upon completion as defined in the
agreement which is anticipated to take place on March 31,
1994. At that time, quarterly principal payments will begin
and future minimum principal payments will be as follows:
<TABLE>
<S> <C>
1994 $ 8,700,000
1995 12,000,000
1996 13,600,000
1997 15,200,000
1998 16,800,000
Thereafter 139,420,000
------------
$205,720,000
============
</TABLE>
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NAHEOLA COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEBT (CONTINUED)
The Partnership assets have been pledged as collateral on
the loan.
Interest paid through the year ended December 26, 1993 was
$22,675,000 of which $5,581,000 was capitalized.
As of December 26, 1993, JRP was in violation of a covenant
included in an equity subscription agreement made by JRP as
part of the loan agreement. As of March 4, 1994, the Equity
Subscription Agreement was amended and JRP is no longer in
violation of the covenant.
5. RESTRICTED CASH AND OTHER LONG-TERM OBLIGATIONS
In accordance with the Operations and Maintenance Agreement
between JRP (the "Operator") and the Partnership dated
March 14, 1991, the Partnership shall deposit into a reserve
account ("the Operator Reserve") the difference between the
baseline amount (as defined in the agreement), $16,848,123
for 1993, and all reimbursable costs incurred by the
Operator. If total reimbursable costs exceed the baseline
amount plus amounts previously withdrawn from the Operator
Reserve in a given year, then the Partnership shall withdraw
the difference from the Operator Reserve to pay the
Operator. Upon termination of the agreement, all funds
remaining in the Operator Reserve shall be paid as a bonus
to the Operator. The Operator Reserve is therefore
restricted as to use in the specific instances stated above
and is not to be used for any other purposes.
6. ACCRUED BONUSES
Upon final completion of the Facility, the Partnership will
owe an additional $2,025,000 to B&W and $2,600,000 to JRP
for completion bonuses. At the time of payment, the
Partnership will draw funds under its long-term financing
arrangement to pay these bonuses.
7. RELATED PARTY TRANSACTIONS
The Partnership provides BLS processing, steam, compressed
air, and electricity to JRP resulting in revenues of
$51,833,479, of which $48,332,068 were paid in 1993.
9
<PAGE> 25
NAHEOLA COGENERATION LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
As Operator under the Operations and Maintenance Agreement
(see Note 5), JRP provides services for operating and
maintaining the Facility. In addition, the Partnership is
insured under the JRC umbrella insurance policy and
reimburses JRC for the Partnership's share of the premiums.
The Partnership paid a total of $9,324,334 to JRP and
affiliates for these services during 1993.
JRP provides field construction management services to the
Partnership for which approximately $3,276,000 was paid
during the year ended December 26, 1993.
On March 4, 1991, JRP contributed assets to the Partnership
having an appraised fair market value of $30,273,000. Under
the terms of the Limited Partnership Agreement, the
Partnership shall pay JRP the amount by which the appraised
value of assets exceeds JRP's portion of total Partnership
equity contributions, required by the loan documents, which
is $30 million. This excess, $273,000, is payable to JRP
within 30 days of Substantial Completion of the Facility as
defined in the turnkey contract.
CRSSC provides administrative and management services to the
Partnership for which approximately $590,000 was paid during
the year ended December 26, 1993.
CRSS, parent of CRSS Capital, provides engineering services
to the Partnership. During the year ended December 26, 1993,
the Partnership paid approximately $86,000 for these
services.
At December 26, 1993, accounts payable and accrued expenses
includes $20,000 payable to CRSSC and $2,934,000 payable to
JRP. Accounts receivable includes $3,501,410 from JRP and
$4,800 from NCI.
10
