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 September 30, 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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
<TABLE>
BALANCE SHEETS
SEPTEMBER 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 2) $ 3,720,802 $ 11,460,672
Accounts receivable 5,321,513 7,353,405
Other receivables 122,100 178,685
Inventories (Note 2) 3,773,014 4,235,685
Spare Parts 2,510,293 2,604,433
Prepaid expenses and other 236,713 317,815
---------------- --------------
Total current assets 15,684,435 26,150,695
Property and equipment 159,504,293 159,512,304
Allowances for depreciation (135,956,144) (134,000,746)
---------------- --------------
23,548,149 25,511,558
---------------- --------------
Total assets $ 39,232,584 51,662,253
================ ==============
Liabilities and Partners'
Capital Deficit
Current liabilities:
Accounts payable $ 3,611,644 $ 3,832,976
Interest payable 60,897 290,740
Taxes payable 3,186,652 1,704,799
Other accrued liabilities 1,338,174 1,241,512
Current portion of long-term debt 6,492,079 3,268,249
---------------- --------------
Total current liabilities 14,689,446 10,338,276
Long-term debt, less current
portion 66,785,014 66,574,072
Partners' capital (deficit):
General Partner (5,807,037) (4,107,859)
Limited Partners (36,911,792) (21,619,189)
Special Limited Partner 5,000,000 5,000,000
Syndication costs (4,523,047) (4,523,047)
---------------- --------------
Total partners' capital deficit (42,241,876) (25,250,095)
Total liabilities and
---------------- --------------
partners' capital deficit $ 39,232,584 $ 51,662,253
================ ==============
</TABLE>
See notes to financial statements.
<PAGE>
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
------------------------------------- --------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales, ethanol $ 19,431,172 $ 24,168,257 $ 68,087,691 $ 77,504,087
By-product revenue 8,762,526 7,223,016 27,661,705 21,108,951
--------------- ---------------- ---------------- ----------------
28,193,698 31,391,273 95,749,396 98,613,038
Cost of goods sold 33,776,508 26,793,351 103,868,921 80,538,200
--------------- ---------------- ---------------- ----------------
Gross profit (Loss) (5,582,810) 4,597,922 (8,119,525) 18,074,838
Selling, general and
administrative expenses 1,885,963 2,010,862 5,971,543 5,865,592
--------------- ---------------- ---------------- ----------------
Income (loss) from operations (7,468,773) 2,587,060 (14,091,068) 12,209,246
Interest income 81,816 149,459 319,607 445,145
Interest expense (1,221,368) (1,080,302) (3,220,320) (3,274,902)
--------------- ---------------- ---------------- ----------------
Net income (loss) $ (8,608,325) $ 1,656,217 $ (16,991,781) $ 9,379,489
=============== ================ ================== ================
Net income (loss)
allocable to limited
partners $ (7,747,493) $ 1,490,595 $ (15,292,603) $ 8,441,540
=============== ================ ================ ================
Limited partner units
outstanding 6,400 6,400 6,400 6,400
=============== ================ ================ ================
Net income (loss) per unit $ (1,211)$ $ 233 $(2,389) $1,319
=============== ================ ================ ================
</TABLE>
See notes to financial statements.
<PAGE>
NEW ENERGY COMPANY OF INDIANA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
NINE NINE
MONTHS ENDED MONTHS ENDED
SEPT 30, 1996 SEPT 30, 1995
(UNAUDITED) (UNAUDITED)
--------------------- ---------------------
<S> <C> <C>
Operating activities
Net income (loss) $ (16,991,781) $ 9,379,489
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Depreciation and amortization 1,963,409 1,950,660
Increase in deferred
management fees payable to
general partner 172,766 324,133
Increase in accrued interest on
long term debt 3,439,119 404,302
Increase (decrease) due to changes
in operating assets and liabilities:
Accounts and other receivables 2,088,477 2,462,868
Inventories 462,671 (414,793)
Spare parts 94,140 (18,226)
Prepaid expenses and other 81,102 73,032
Accounts payable (221,332) 276,896
Interest payable (229,843) (51,761)
Taxes payable 1,481,853 468,618
Other accrued liabilities 96,662 (126,836)
--------------------- ---------------------
Net cash provided by (used in) operating
activities (7,562,757) 14,728,382
Investing activities
Purchase of property and equipment --- (210,506)
--------------------- ---------------------
Net cash used in investing activities --- (210,506)
--------------------- ---------------------
Financing activities
Net change in working capital loan 900,000 ---
Payments on long-term debt (1,077,113) (11,557,612)
--------------------- ---------------------
Net cash used in financing activities (177,113) (11,557,612)
--------------------- ---------------------
Increase (decrease) in cash and cash
equivalents (7,739,870) 2,960,264
Cash and cash equivalents, beginning of period 11,460,672 8,879,804
--------------------- ---------------------
Cash and cash equivalents, end of period $ 3,720,802 $ 11,840,068
===================== =====================
</TABLE>
See notes to financial statements.
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements
For the Quarter Ended September 30, 1996 (Unaudited)
1. Organization and Significant Accounting Policies
New Energy Company of Indiana Limited Partnership (the "Company"), the
General Partner of which is New Energy Corporation of Indiana (the
"General Partner"), operates an ethanol production facility in South
Bend, Indiana. The Company sells ethanol to petroleum refiners, blenders
and retailers on unsecured terms. To a large extent, the Company's
operations are dependent upon market factors which are outside the
Company's control. The Company's cost of production is largely dependent
upon the cost of corn, its principal raw material. In addition, the
Company's revenues are principally generated from the sale of ethanol,
the price of which can vary at times with the price of gasoline, methyl
tertiary butyl ether ("MTBE"), and the value of state and federal tax
exemptions and credits; and from the sale of distillers' dried grains and
solubles ("DDGS"), the price of which fluctuates with the agricultural
by-product market. Because the Company is unable to directly control the
relationship of the corn, gasoline and agricultural by-product markets,
and is unable to assure the continuation of state and federal tax
exemptions and credits, changes in market conditions could adversely
affect the future operations of the Company.
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 classification follows:
<TABLE>
September 30, 1996 December 31, 1995
<S> <C> <C>
Raw materials $2,147,732 $2,162,478
Work-in-process 654,330 559,451
Finished goods 970,952 1,513,756
----------- ---------
$3,773,014 $4,235,685
========= =========
</TABLE>
The Company has executed a contract 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. In connection
with the contract, the Company has purchased for the benefit of the grain
supplier an irrevocable standby letter of credit of $1,000,000, secured
by cash and cash equivalents, which expires March 31, 1997. As of October
18, 1996, the Company has fixed the price for anticipated corn purchases
through March 1997.
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On October 14, 1982, the Company and the Business Development Corporation of
South Bend, Mishawaka & St. Joseph County, IN ("BDC"), a not-for-profit
corporation organized and existing under the laws of the State of Indiana,
entered into a loan agreement (the "BDC Loan") whereby the BDC through a grant
the BDC received from the U.S. Department of Housing and Urban Development,
loaned $2,432,264 to the Company for the construction of certain ethanol plant
facilities within the City of South Bend, Indiana.
On December 23, 1991, the Company restructured its loan with the United States
Department of Energy ("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.
On March 25, 1996, the Company and DOE entered into an agreement ("DOE Letter
Agreement") which allowed 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 have been suspended on Note
A. Suspended payments on Note A have been added monthly to the outstanding
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 calculated and paid on a
cash flow basis as defined in the DOE Letter Agreement.
On March 27, 1996, the Company and BDC entered into an agreement ("BDC Letter
Agreement") which allowed the Company to suspend payment of all principal and
interest payments under the BDC Loan during the period January 1, 1996 through
September 30, 1996. Principal and interest payments totaling $69,877 are due BDC
on each of February 1, May 1, August 1 and November 1. Under the terms of the
BDC Letter Agreement, three payments (due in February, May and August 1996),
totaling $209,631 have been suspended. Suspended payments are evidenced by 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.
On August 23, 1996, the Company and Great American Insurance Company, an entity
related to Chiquita Brands International, Inc., a shareholder of New Energy
Corporation of Indiana, the general partner of the Company, entered into a $10
million revolving working capital loan facility (the "GAIC Loan") through
December 31, 1997, secured by the Company's accounts receivable, inventory and
certain other assets. The loan provides for interest at three percent over the
"prime rate" of interest as quoted daily in The Wall Street Journal and includes
other terms customary in the commercial loan market.
<PAGE>
Also, in connection with the GAIC Loan, the DOE and BDC agreed to suspend the
Company's obligation to make debt service payments from October 1, 1996 through
December 31, 1997, and under certain circumstances, through December 31, 1998.
The suspension ends for any month that the Company is able to generate earnings
and cash flow sufficient to repay the GAIC Loan and have cash in excess of $4.8
million on deposit in its bank.
During the first nine months of 1996, the Company's average cost per bushel of
corn processed was approximately 70% higher than the same period in 1995. This
was due primarily to a smaller corn crop during 1995 than in 1994 and an
increase in worldwide demand for corn. As of the date of this report, corn
prices have declined by approximately one third from their highest levels in
1996. The Company has contracted for anticipated corn requirements for the
fourth quarter 1996 at average prices approximately 33% less than those
experienced in the third quarter, 1996 but still approximately 25% more than the
fourth quarter 1995. The Company has contracted anticipated corn requirements
for the first quarter 1997 at average prices approximately 2% below the average
corn price for the first quarter 1996. There can be no assurance, however, that
the decline in corn prices will continue or result in lower or similar corn
prices relative to prior corresponding periods.
Also, notwithstanding the Company's ethanol sales contracts through March 1997
(and in some cases April 1997) at prices that based on contracted corn prices,
should result in positive operating income for the quantities sold under the
ethanol sales contracts, because of fluctuations in: a) required purchase
quantities under the ethanol sales contracts; b) ethanol spot market prices; and
c) DDGS prices, there can be no assurance that the Company will produce positive
operating income or net profit through the first quarter of 1997.
As a result of the rise in corn prices in the first nine months of the year, the
Company decreased production by approximately 36% during the period June through
September 1996. The Company is returning to production at prior levels, but has
not yet attained such levels because of technical difficulties confronted in
ramping up production. The Company anticipates resolution of the technical
difficulties related to production and a return to prior levels. There, however,
can be no assurance that such technical difficulties will be surmounted or that
production will return to historical levels.
On a long term basis, the Company's ability to maintain sufficient liquidity to
meet its debt service and other obligations will depend on further concessions
by the DOE and BDC, obtaining additional financing, and/or upon favorable market
price levels for corn and ethanol, factors over which the Company has little
control. However, through its corn purchasing agreement (see Note 2 to the
financial statements) and its strategy to execute multiple month ethanol sales
contracts, the Company is attempting to minimize its exposure to fluctuations in
the corn and gasoline/MTBE markets. There can be no assurance, however, that any
or all of the foregoing factors will obtain so as to permit the Company to
maintain sufficient liquidity to meet its debt service and other obligations in
the longer term.
<PAGE>
RESULTS OF OPERATIONS
For the quarter ended September 30, 1996, the Company generated a loss of
$8,608,325 as compared to income of $1,656,217 for the quarter ended September
30, 1995. The loss generated during the quarter ended September 30, 1996 was
primarily due to significantly elevated corn prices caused by a significantly
smaller 1995 corn crop than in 1994, and an increase in worldwide demand for
corn.
Revenues from the sale of ethanol decreased during the quarter ended September
30, 1996, to $19,431,172 from $24,168,257 during the quarter ended September 30,
1995. This decrease was primarily due to a decrease in the volume of ethanol
sold offset by an increase in the average price per gallon. The volume decrease
is primarily due to the decrease in production beginning in June 1996 as a
result of elevated corn prices.
Revenue from the sale of by-products increased during the quarter ended
September 30, 1996, to $8,762,526 from $7,223,016 during the quarter ended
September 30, 1995. The increase in by-product revenue was primarily due to a
significant increase in the selling price of DDGS offset by a decrease in volume
produced as a result of the ethanol production decrease beginning in June 1996.
Ethanol production totaled 15,085,659 gallons for the quarter ended September
30, 1996, as compared to 21,397,463 gallons for the quarter ended September 30,
1995. This decrease primarily results from the decrease in production beginning
in June 1996 as a result of elevated corn prices. The plant also produced 51,340
tons of DDGS and 34,023 tons of gaseous carbon dioxide for the quarter ended
September 30, 1996 as compared to 71,443 tons of DDGS and 40,465 tons of gaseous
carbon dioxide for the quarter ended September 30, 1995. DDGS and gaseous carbon
dioxide are by-products of the ethanol production process and consequently
decreased primarily as a result of the ethanol production decrease beginning in
June 1996.
Cost of goods sold increased by $6,983,157 during the quarter ended September
30, 1996, compared to the same period in 1995, primarily due to a significant
increase in the price of corn.
For the nine months ended September 30, 1996, the Company generated a loss of
$16,991,781 as compared to income of $9,379,489 for the nine months ended
September 30, 1995. The loss generated was primarily due to a significant
increase in the price of corn, the Company's primary raw material, with little
corresponding increase in the price of ethanol, most of which was already under
contract to customers.
Revenue from the sale of ethanol decreased during the nine months ended
September 30, 1996, to $68,087,691 from $77,504,087 during the nine months ended
September 30, 1995. This decrease was primarily due to a decrease in production
beginning in June 1996 caused by higher corn prices and to a lesser extent, an
unplanned outage caused by equipment failure.
Revenue from the sale of by-products increased during the nine months ended
September 30, 1996, to $27,661,705 from $21,108,951 during the nine months ended
September 30, 1995. This increase in by-product revenue was primarily due to a
significant increase in the selling price of DDGS offset by a decrease in volume
produced as a result of the ethanol production decrease beginning in June 1996.
Ethanol production totaled 53,775,121 gallons for the nine months ended
September 30, 1996, as compared to 65,335,637 gallons for the nine months ended
September 30, 1995. This decrease was primarily due to a decrease in production
beginning in June 1996 caused by higher corn prices and to a lesser extent, an
unplanned outage caused by equipment failure. The plant also produced 174,394
tons of DDGS and 110,391 tons of gaseous carbon dioxide for the nine months
ended September 30, 1996, as compared to 211,776 tons of DDGS and 124,198 tons
of gaseous carbon dioxide for the nine months ended September 30, 1995.
Cost of goods sold increased by $23,330,721 during the nine months ended
September 30, 1996, compared to the same period in 1995 primarily due to a
significant increase in the price of corn.
<PAGE>
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
The GAIC Loan restricts the use of the Company's cash, including its
use for, among other things: (a) any distribution in cash or in kind
with respect to the partnership interests of the Company or any
guaranteed payment made by the Company to any partner of the Company
other than payment of the administration fee to New Energy
Corporation of Indiana, the general partner of the Company, (b) any
purchase, redemption or other acquisition for value of any
partnership interest of the Company, (c) any loan, advance,
extension of credit or guarantee obligation by the Company to any
affiliate of the Company, other than as permitted under the GAIC
Loan, (d) any investment in any affiliate of the Company.
Item 3. Defaults Upon Senior Securities
On or about May 17, 1996, the Company elected not to pay its real
estate taxes due and payable on May 17, 1996, in the amount of
$879,421. Non-payment of these taxes resulted in a default under
certain agreements with the DOE and the BDC. The Company requested
the DOE and BDC to waive such a default. On August 15, 1996, the DOE
agreed to "stand still" respecting the tax payment default,
contingent upon a "commercial" loan [that would bring the taxes
current by November 10, 1996] being approved by the [DOE] and the
appropriate documents being executed among the parties. The Company
believes that the GAIC Loan has satisfied the DOE's condition
precedent for the continuation of a "standstill" under the DOE loan
agreement respecting the Unpaid Taxes. Moreover, in connection with
the GAIC Loan, the BDC agreed not to declare a default by the
Company under the BDC's loan, as amended, because of the Unpaid
Taxes, unless the Unpaid Taxes remain unpaid after November 11,
1996. The Unpaid Taxes were paid on November 8, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
<PAGE>
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:
On August 23, 1996, the Company filed a report on Form 8-K,
reporting among other things under Item 5. Other Events, the
placement of the GAIC Loan, incorporated herein by reference.
<PAGE>
SIGNATURE
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: November 14, 1996 By: S/___________________________
Larry W. Singleton
President & Treasurer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK>0000355783
<NAME>NONE
<MULTIPLIER> 1
<CURRENCY> <blank>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 0
<CASH> 3,720,802
<SECURITIES> 0
<RECEIVABLES> 5,443,613
<ALLOWANCES> 0
<INVENTORY> 6,283,307
<CURRENT-ASSETS> 15,684,435
<PP&E> 159,504,293
<DEPRECIATION> 135,956,144
<TOTAL-ASSETS> 39,232,584
<CURRENT-LIABILITIES> 14,689,446
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0
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<TOTAL-LIABILITY-AND-EQUITY> 39,232,584
<SALES> 28,193,698
<TOTAL-REVENUES> 28,193,698
<CGS> 33,776,508
<TOTAL-COSTS> 33,776,508
<OTHER-EXPENSES> 1,885,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,221,368
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</TABLE>
