Page 1 of 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________to__________________
Commission file number 0-11431
New Energy Company of Indiana Limited Partnership
(formerly, New Energy Company of Indiana)
(Exact name of registrant as specified in its charter)
Indiana 52-1195762
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3201 West Calvert Street, South Bend, Indiana 46613
(Address of principal executive offices)
(Zip Code)
219-233-3116
(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 _
Page 2 of 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
BALANCE SHEETS
MARCH 31, 1996 DECEMBER 31, 1995
Assets (UNAUDITED) (AUDITED)
Current assets:
Cash and cash equivalents $ 8,927,375 $ 11,460,672
Accounts receivable 6,083,485 7,353,405
Other receivables 525,195 178,685
Inventories 3,217,502 4,235,685
Spare parts 2,597,162 2,604,433
Prepaid expenses and other 454,054 317,815
Total current assets 21,804,773 26,150,695
Property, plant and equipment 159,508,932 159,512,304
Accumulated depreciation (deduction) (134,652,545) (134,000,746)
24,856,387 25,511,558
Total assets $ 46,661,160 $ 51,662,253
=========== ===========
Liabilities and partners'
capital deficit
Current liabilities:
Accounts payable $ 2,839,101 $ 3,832,976
Interest payable 46,962 290,740
Taxes payable 2,144,765 1,704,799
Other accrued liabilities 1,169,272 1,241,512
Current portion of long-term debt 5,765,824 3,268,249
Total current liabilities 11,965,924 10,338,276
Long-term debt, less current portion 63,928,725 66,574,072
Partners' capital (deficit):
General partner (4,506,198) (4,107,859)
Limited partners (25,204,244) (21,619,189)
Special limited partner 5,000,000 5,000,000
Syndication costs (4,523,047) (4,523,047)
Total partners' capital deficit (29,233,489) (25,250,095)
Total liabilities and ___________ ___________
partners' capital deficit $ 46,661,160 $ 51,662,253
=========== ===========
See notes to financial statements.
Page 3 of 10
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
(UNAUDITED) (UNAUDITED)
Net sales, ethanol $ 24,861,331 $ 25,862,615
By-product revenue 9,630,199 7,166,405
34,491,530 33,029,020
Cost of goods sold 35,601,686 26,102,946
Gross profit (loss) (1,110,156) 6,926,074
Selling, general and
administrative expenses 2,005,976 1,907,006
Income (loss) from operations (3,116,132) 5,019,068
Interest income 129,343 122,995
Interest expense (996,605) (1,101,139)
Net income (loss) $ (3,983,394) $ 4,040,924
========== ==========
Net income (loss) allocable to
limited partners $ (3,585,055) $ 3,636,832
========== ==========
Limited partner units
outstanding 6,400 6,400
========== ==========
Net income (loss) per unit $ (560) $ 568
========== ==========
See notes to financial statements.
Page 4 of 10
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
(UNAUDITED) (UNAUDITED)
Operating activities
Net income (loss) $(3,983,394) $ 4,040,924
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 655,171 650,220
Decrease in deferred management
fees payable to general partner (589,451)
Increase in accrued interest on
general partner loan 134,399 133,286
Increase (decrease) due to changes
in operating assets and liabilities:
Accounts and other receivables 923,410 3,511,565
Inventories 1,018,183 1,499,823
Spare parts 7,271 (17,980)
Prepaid expenses and other (136,239) (389,740)
Accounts payable (993,875) (749,754)
Interest payable (243,778) (288,628)
Taxes payable 439,966 422,248
Other accrued liabilities (72,240) 200,535
Net cash provided by (used in) operating
activities (2,251,126) 8,423,048
Investing activities
Purchase of property and equipment 0 (75,682)
Net cash used in investing activities 0 (75,682)
Financing activities
Payments of long-term debt (282,171) (4,680,847)
Net cash used in financing activities (282,171) (4,680,847)
Increase (decrease) in cash and cash
equivalents (2,533,297) 3,666,519
Cash and cash equivalents, beginning of
period 11,460,672 8,879,804
Cash and cash equivalents, end of period $ 8,927,375 $12,546,323
========== ==========
See notes to financial statements.
Page 5 of 10
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements
For the Quarter Ended March 31, 1996 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
2. INVENTORIES
Inventories consist of raw materials (corn, coal, unleaded
gasoline and chemicals), work-in-process and finished goods (fuel
grade ethanol and DDGS). A summary of inventories by classifica-
tion follows:
March 31, 1996 December 31, 1995
Raw materials $1,091,087 $2,162,478
Work-in-process 762,511 559,451
Finished goods 1,363,904 1,513,756
$3,217,502 $4,235,685
========= =========
For the years 1995 and 1996 the Company executed contracts with a
grain supplier to provide its expected corn requirements at a price
which may fluctuate with the commodity prices or be fixed at the
Company's election. As of May 15, 1996, the Company has fixed the price
for all corn purchases through July 10, 1996.
Page 6 of 10
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On December 23, 1991, the Company restructured its loan with the Doe by
the execution of an Amended and Restated Loan Restructuring Agreement (the
"Restructuring Agreement") and two new promissory notes, Note A and Note B.
Note A, in the amount of $55,000,000,provides for 119 consecutive monthly
installments of interest and principal of $631,533 commencing April 30, 1992
and maturing on March 31, 2002. Note A provides for a fixed rate of interest
of 6.75% per annum. Note B, in the amount of $40,622,523, provides for a
fixed rate of interest of 4.00% per annum. Payments of Note B are based upon
monthly cash flow as defined by the Restructuring Agreement. Note B matures
on March 31, 2002. Accordingly, the fixed monthly payment required by the
Restructuring Agreement is $631,533. Based upon present facts and circum-
stances, management has estimated that principal payments of approximately
$3,012,767 will be made during the next twelve months under the terms of
Note B.
On March 25, 1996, the Company and the DOE entered into an agreement ("DOE
Letter Agreement") which allows the Company to suspend payment of all Note
A principal and interest payments during the period January 1, 1996, through
September 30, 1996. As described above, Note A requires monthly principal
and interest payments totaling $631,533. Under the terms of the DOE Letter
Agreement, nine principal and interest payments totaling $5,683,797 will be
suspended on Note A. Suspended payments will be added monthly to the out-
standing principal balance of Note B and will accrue interest at the Note B
interest rate of 4% per annum. Note B payments will continue to be calcu-
lated and paid on a cash flow basis as defined in the DOE Letter Agreement.
The DOE has certain rights should there be a default under the Doe Letter
Agreement or the Restructuring Agreement, including the acceleration of the
debt and enforcement of its liens securing the debt which cover substantially
all of the Company's assets.
On October 14, 1982, the Company entered into an agreement with the SBDC,
a not-for-profit corporation organized and existing under the laws of the
State of Indiana, which provided for the financing, through the U.S.
Department of Housing and Urban Development, of a loan to the Company, in
the aggregate amount of $2,432,264, for the construction of certain ethanol
plant facilities within the City of South Bend, Indiana. As of March 31,
1996, the principal amount of debt owed to SBDC was $967,744.
On March 27, 1996, the Company and SBDC entered into an agreement ("SBDC
Letter Agreement") which allows the Company to suspend payment of all
principal and interest payments due SBDC during the period January 1, 1996,
through September 30, 1996. Principal and interest payments totaling
$69,877 are due SBDC on each of February 1, 1996; May 1, 1996; August 1,
1996 and November 1, 1996. Under the terms of the SBDC Letter Agreement,
three payments due in February, May, and August 1996, totaling $209,631
will be suspended. Suspended payments will be evidenced by the execution
of a new note that will accrue interest at a rate of 6% per annum and be
payable in 38 equal monthly payments of $6,194 beginning October 1, 1996.
During 1995, the Company had sufficient liquidity to meet its debt and
other obligations. On a long-term basis, the Company's ability to
maintain sufficient liquidity to meet its debt service and other
Page 7 of 10
obligations will depend to a large extent upon favorable market price
levels for corn and ethanol, factors over which the Company has little
control. However, through its corn purchasing agreement and its strategy
to execute long-term ethanol sales contracts, the Company is attempting
to minimize its exposure to fluctuations in the corn and gasoline markets.
During the first nine months of 1996, the Company anticipates that it will
experience a significant increase in the price it pays for corn due primarily
to a smaller corn crop during 1995 than in 1994 and an increase in worldwide
demand for corn. During the first three months of 1996, the Company's average
cost per bushel of corn was approximately 50% higher than the same period
in 1995. Since that period corn prices have continued to rise and as of May
15, 1996, the cash price for a bushel of corn has increased approximately
100% from its level during the same period in 1995. The Company does not
anticipate that corn prices will decrease significantly before the arrival
of new crop corn in October, 1996.
As a result of the continued rise in corn prices, the Company has decided to
decrease production by approximately 40% during the period June through
September, 1996. The Company anticipates returning to full production upon
arrival of new crop corn in October, 1996, when prices are expected to be
closer to historical levels. In connection with the decrease in production
the Company has laid-off 28 employees representing approximately 17% of its
workforce. The Company anticipates that it will recall laid-off employees
when the Plant returns to its full production level. Notwithstanding
the current increase in corn prices, the Company anticipates that its
cash reserves combined with the temporary decrease in production and workforce
and the cashflow benefits of the DOE and SBDC Letter Agreements will allow
it to maintain sufficient liquidity to meet demands in fiscal 1996.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, the Company generated a loss
of $3,983,394 compared to income of $4,040,924 for the three months ended
March 31, 1995. The loss generated during the three months ended March 31,
1996 was primarily due to a significant increase in the price of corn caused
by a significantly smaller 1995 corn crop and an increase in worldwide demand
for corn.
Revenue from the sale of ethanol decreased during the three months ended
March 31, 1996 to $24,861,331 from $25,862,615 during the three months
ended March 31, 1995. This decrease was primarily due to a decrease in the
price of ethanol sold.
Revenue from the sale of by-products increased during the three months ended
March 31, 1996 to $9,630,199 from $7,166,405 during the three months ended
March 31, 1995. The increase in by-product revenue was primarily due to a
significant increase in the selling price of DDGS.
Ethanol production totaled 20,603,693 gallons for the three months ended
March 31,1996 as compared to 21,710,045 gallons for the three months ended
March 31, 1995. The approximate 5.3% decrease in ethanol production was
primarily due to an unplanned outage caused by equipment failure. The
plant also produced 64,467 tons of distillers dried grains and 40,013
tons of gaseous carbon dioxide for the three months ended March 31, 1996
Page 8 of 10
as compared to 68,759 tons of distillers dried grains and 40,079 tons of
gaseous carbon dioxide for the three months ended March 31, 1995. Distillers
dried grains and gaseous carbon dioxide are by-products of the ethanol
production process.
Cost of goods sold was $9,498,740 for the three months ended March 31,1996
over the same period in 1995 primarily due to a significant increase in the
price of corn.
Page 9 of 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not party to any material legal proceedings
other than routine litigation incidental to its business.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A.) Exhibits:
4.1 Restated and Amended Limited Partnership Agreement
of the Company dated October 26, 1982 (filed as
Exhibit 12 to the Form 8 amending the Company's
quarterly report on Form 10-Q for the nine months
ended September 30, 1982, and incorporated herein
by reference).
4.2 Form of Subscription Agreement (filed as Exhibit
B-2 to the Registration Statement on Form S-1, No.
2-74254, and incorporated herein by reference).
4.3 Form of Assumption Agreement (filed as Exhibit B-3
to the Prospectus dated April 28, 1982 contained in
the Company's Registration Statement on Form S-1,
No. 2-74254, and incorporated herein by reference).
B.) Reports on Form 8-K:
None
Page 10 of 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NEW ENERGY COMPANY OF INDIANA
LIMITED PARTNERSHIP
By: New Energy Corporation of Indiana,
General Partner
Dated: May 15, 1996 By: S\________________________________
John H. Parker
President and Chief Executive
Officer
Dated: May 15, 1996 By: S\________________________________
Anthony R. Corso
Executive Vice President, Chief
Financial Officer and Chief
Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,927,375
<SECURITIES> 0
<RECEIVABLES> 6,608,680
<ALLOWANCES> 0
<INVENTORY> 5,814,664
<CURRENT-ASSETS> 21,804,773
<PP&E> 159,508,932
<DEPRECIATION> (134,652,545)
<TOTAL-ASSETS> 46,661,160
<CURRENT-LIABILITIES> 11,965,924
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,661,160
<SALES> 34,491,530
<TOTAL-REVENUES> 34,491,530
<CGS> 35,601,686
<TOTAL-COSTS> 35,601,686
<OTHER-EXPENSES> 2,005,976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 996,605
<INCOME-PRETAX> (3,983,394)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,983,394)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
