[TEST]
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) of THE
SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 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 46680
(Address of principal executive office) (zip code)
(Registrant's telephone number, including area code:) (219)233-3116
------------------
Securities Registered Pursuant to Section 12(b) of the Act
None
Securities Registered Pursuant to Section 12(g) of the Act
Limited Partnership Interests
(Title of Class)
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 preceding twelve 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
-------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
Not Applicable.
ITEM 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................... 27
Financial Statements:
Balance Sheets as of December 31, 1996 and 1995.......... 28
Statements of Operations for the years
ended December 31, 1996, 1995 and 1994.................. 30
Statements of Partners' Capital Deficit for the
years ended December 31, 1996, 1995 and 1994........... 31
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994........................ 32
Notes to Financial Statements................................ 34
</TABLE>
Financial Statement Schedules:
None
* * *
All financial statement schedules are omitted because they are either not
applicable or the required information is included in the financial statements
or notes thereto.
26
<PAGE>
Report of Independent Auditors
Partners
New Energy Company of Indiana Limited Partnership
We have audited the accompanying balance sheets of New Energy Company of
Indiana Limited Partnership as of December 31, 1996 and 1995, and the related
statements of operations, partners' capital deficit and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company'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 New Energy Company of Indiana
Limited Partnership at December 31, 1996 and 1995, and the results of its
operations, partners' capital deficit and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
March 20, 1997
Indianapolis, Indiana
27
<PAGE>
<TABLE>
<CAPTION>
New Energy Company of Indiana Limited Partnership
Balance Sheets
December 31
Assets (Note 3) 1996 1995
----------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 3,765,950 $ 11,460,672
Accounts receivable 6,879,774 7,353,405
Other receivables 150,783 178,685
Inventories (Note 2) 4,822,450 4,235,685
Spare parts 2,419,626 2,604,433
Prepaid expenses and other 361,918 317,815
----------------------------------------
Total current assets 18,400,501 26,150,695
Property and equipment:
Land 2,047,477 2,047,477
Land improvements 2,316,203 2,316,203
Buildings 3,753,067 3,744,805
Machinery and equipment 151,277,927 151,262,507
Construction in progress 125,732 141,312
Allowances for depreciation (136,540,361) (134,000,746)
----------------------------------------
22,980,045 25,511,558
----------------------------------------
Total assets $ 41,380,546 $ 51,662,253
========================================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
----------------------------------------
<S> <C> <C>
Liabilities and partners'
capital deficit
Current liabilities:
Accounts payable $ 2,992,298 $ 3,832,976
Interest payable (Note 3) 42,505 290,740
Taxes payable 1,794,614 1,704,799
Other accrued liabilities 1,440,799 1,241,512
Working capital loan (Note 3) 1,200,000 -
Current portion of long-term
debt (Note 3) 740,893 3,268,249
----------------------------------------
Total current liabilities 8,211,109 10,338,276
Deferred management fees payable
to general partner (Note 6) 351,758 -
Long-term debt, less current
portion (Note 3) 71,200,490 66,574,072
Partners' capital (deficit) (Note 5):
General partner (5,421,131) (4,107,859)
Limited partners (33,438,633) (21,619,189)
Special limited partner 5,000,000 5,000,000
Syndication costs (4,523,047) (4,523,047)
----------------------------------------
Total partners' capital deficit (38,382,811) (25,250,095)
----------------------------------------
Total liabilities and partners'
capital deficit $ 41,380,546 $51,662,253
========================================
</TABLE>
See accompanying notes.
29
<PAGE>
<TABLE>
<CAPTION>
New Energy Company of Indiana Limited Partnership
Statements of Operations
Years ended December 31
1996 1995 1994
----------------------------------------------
<S> <C> <C> <C>
Net sales, ethanol $ 94,918,677 $ 103,227,074 $ 96,111,285
By-product revenue 36,775,692 30,859,962 31,818,002
----------------------------------------------
131,694,369 134,087,036 127,929,287
Cost of goods sold 134,455,026 111,006,086 118,291,931
----------------------------------------------
(2,760,657) 23,080,950 9,637,356
Selling, general and
administrative expenses 6,280,838 7,703,227 7,736,138
----------------------------------------------
(9,041,495) 15,377,723 1,901,218
Other income (expense):
Interest income 364,207 591,931 313,159
Interest expense (4,455,428) (4,318,679) (4,757,339)
Other income (expense) - 2,895 (6,624)
----------------------------------------------
Net income (loss) $(13,132,716) $ 11,653,870 $ (2,549,586)
==============================================
Net income (loss) allocable
to limited partners $(11,819,444) $ 10,488,483 $ (2,294,627)
==============================================
Limited partner units
outstanding 6,400 6,400 6,400
==============================================
Net income (loss) per unit $ (1,847) $ 1,639 $ (359)
==============================================
See accompanying notes.
30
<PAGE>
<CAPTION>
New Energy Company of Indiana Limited Partnership
Statements of Partners' Capital Deficit
Special
General Limited Limited
Partner Partners Partner
----------------------------------------------
<S> <C> <C> <C>
Capital (deficit) at
January 1, 1994 $ (5,018,287) $ (29,813,739) $ 5,000,000
Net loss - 1994 (254,959) ( 2,294,627) -
Contributions - 694 -
----------------------------------------------
Capital (deficit) at
December 31, 1994 (5,273,246) (32,107,672) 5,000,000
Net income - 1995 1,165,387 10,488,483 -
----------------------------------------------
Capital (deficit) at
December 31, 1995 (4,107,859) (21,619,189) 5,000,000
Net loss - 1996 (1,313,272) (11,819,444) -
----------------------------------------------
Capital (deficit) at
December 31, 1996 $ (5,421,131) $ (33,438,633) $ 5,000,000
==============================================
</TABLE>
See accompanying notes.
31
<PAGE>
[CAPTION]
New Energy Company of Indiana Limited Partnership
Statements of Cash Flows
Years ended December 31
1996 1995 1994
----------------------------------------------
[S] [C] [C] [C]
Operating activities
Net income (loss) $ (13,132,716) $ 11,653,870 $ (2,549,586)
Adjustments to reconcile
net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 2,539,616 2,550,148 10,733,075
Increase (decrease) in
deferred management fees
payable to general partner 351,758 (1,100,188) (119,172)
Increase (decrease) in interest
expense deferred and added to
long-term debt 4,124,889 (380,277) 540,550
Net loss (gain) on disposition
of property and equipment - (2,895) 6,624
Increase (decrease) due to
changes in operating assets
and liabilities:
Accounts and other
receivables (934,495) 571,680 (3,639,768)
Inventories (586,765) 217,591 1,291,221
Spare parts 184,807 6,568 26,483
Prepaid expenses
and other (44,103) 28,432 76,000
Accounts payable (840,678) 628,488 619,010
Interest payable (248,235) (51,782) 74,046
Taxes payable 89,815 62,675 17,907
Other accrued
liabilities 199,287 336,045 250,085
----------------------------------------------
Net cash provided by (used in)
operating activities (8,296,820) 14,520,355 7,326,475
Investing activities
Purchases of property and equipment (8,103) (373,272) (173,629)
Proceeds from sale of property and
equipment - 2,895 -
----------------------------------------------
Net cash used in investing
activities (8,103) (370,377) (173,629)
Financing activities
Payment on working capital loan (600,000) - -
Proceeds from working capital loan
borrowings 1,800,000 - -
Payments on long-term debt (1,089,799) (11,569,110) (8,410,772)
Proceeds from long-term debt
borrowings 500,000 - -
Capital contributions from
limited partners - - 694
----------------------------------------------
Net cash provided by (used in)
financing activities 610,201 (11,569,110) (8,410,078)
----------------------------------------------
Increase (decrease) in cash and
cash equivalents (7,694,722) 2,580,868 (1,257,232)
Cash and cash equivalents,
beginning of year 11,460,672 8,879,804 10,137,036
----------------------------------------------
Cash and cash equivalents, end
of year $ 3,765,950 $ 11,460,672 $ 8,879,804
==============================================
[/TABLE]
32
<PAGE>
See accompanying notes.
33
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements
December 31, 1996
1. Organization and Significant Accounting Policies
Organization and Operations
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
competes against several other ethanol producers some of which are larger and
operate out of flexible, integrated production facilities.
The Company sells ethanol to petroleum refiners, blenders and retailers on
unsecured terms. Customers, each accounting for 10% or more of sales, totaled
84%, 59% and 24% of total ethanol sales in 1996, 1995 and 1994, respectively.
The Company also sells distillers' dried grains and solubles ("DDGS") and
carbon dioxide, both by-products, on unsecured terms. The Company sold
approximately 3%, 9% and 17% of its DDGS to a worldwide exporter for sales
overseas in 1996, 1995 and 1994, respectively. In 1996, 1995 and 1994 another
customer also accounted for 21%, 22% and 27%, respectively, of its DDGS sales.
Carbon dioxide sales are made to one customer on contract which extends to the
year 1999.
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 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 and political
conditions could adversely affect the future operations of the Company.
The Company has several programs which, management believes, serve to reduce
the risk associated with the purchase of corn and sale of ethanol and its
by-products. First, the Company enters into long-term contracts with major
gasoline refiners to sell a significant portion of its ethanol production.
Second, the Company has executed a contract which allows it to flat price a
significant portion of its 1997 corn requirements on a rolling basis at a
price which is fixed based upon the futures market price for corn. In
addition, the Company has purchased option contracts for certain time periods
to reduce the risk of significant upward price fluctuations in corn prices.
34
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
On a long-term basis, the Company's ability to maintain sufficient liquidity
to meet its debt requirements and other obligations will depend on a
combination of factors which include, among others, further concessions from
its lenders, obtaining additional financing, favorable market price levels for
corn and ethanol, availability of corn at reasonable prices and continuation
of state and federal tax exemptions and credits.
Statements of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less when purchased to
be cash equivalents.
Financial Instruments
The carrying amounts reported in the balance sheet for financial instrument
assets approximate those assets' fair value. Payment of long-term liabilities
are generally dependent upon the Company's ability to achieve cash flow.
Management believes that estimating the fair value of these long-term
liabilities is either not appropriate or, because of excess costs, considers
estimation of fair value to otherwise be impracticable.
Inventories
Inventories consist of raw materials (corn, coal and chemicals), work in
process and finished goods (ethanol and DDGS). Coal and chemical inventories
are stated at the lower of average cost or market. Corn and ethanol
inventories are stated at the lower of cost (FIFO) or market. DDGS, a
by-product, is stated at net realizable value.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided over the
estimated useful lives of the assets using the straight-line method.
35
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Pension Plans
The Company has a defined benefit pension plan covering substantially all
full-time employees. The Company's policy is to fund amounts as are necessary
on an actuarial basis to provide sufficient funds to meet benefits to be paid
to plan members.
Federal Income Taxes
No provision is made for federal income taxes or related credits since the
results of operations are included in the tax returns of the partners.
Use of Estimates
Preparation of the financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. Inventories
The major components of inventories at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------
<S> <C> <C>
Raw materials $ 2,429,888 $ 2,162,478
Work in process 542,018 559,451
Finished goods 1,850,544 1,513,756
------------------------------
$ 4,822,450 $ 4,235,685
==============================
</TABLE>
In January 1996, the Company executed a contract with a grain supplier to
provide its expected corn requirements through December 31, 1997 (subject to
price and quantity renegotiation subsequent to September, 1997) 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 an
irrevocable standby letter of credit for $1,000,000, secured by cash and cash
equivalents, which expires March 31, 1997, for the benefit of the grain
supplier. As of March 20, 1997, the Company has fixed the price for all corn
purchases through approximately April, 1997.
36
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
2. Inventories (continued)
In 1996, the Company purchased option contracts to reduce the risk associated
with price fluctuations of the corn used in its manufacturing process. Market
value gains and losses on these option contracts are recognized currently as a
component of cost of goods sold.
3. Working Capital Loan and Long-Term Debt
On August 23, 1996, the Company entered into a revolving working capital loan
with Great American Insurance Company (GAIC), an affiliate of a shareholder of
the General Partner. The loan provides a $10,000,000 line of credit,
collateralized by a senior lien on the Company's accounts receivable,
inventory and certain other assets, and is due the later of December 31, 1997
or such date that GAIC agrees to extend the maturity date, but, in no event
later than December 31, 1998. Interest is computed at prime plus 3% (11.25%
at December 31, 1996). In connection with the GAIC loan, the Department of
Energy ("DOE") and the Business Development Corporation of South Bend, Indiana
("BDC") entered into a Subordination and Intercreditor Agreement with GAIC
pursuant to which, among other things, the DOE and BDC agreed to subordinate
their debt, as discussed below, to the unpaid balance of the GAIC loan. The
Company paid a closing fee of $200,000 and reimbursed GAIC for their legal
fees of $32,942. The loan also calls for an annual .75% unused commitment fee
payable monthly.
Long-term debt is collateralized by substantially all the assets of the
Company and consists of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
Department of Energy note payable ("Note A"),
interest at 6.75%, due March 31, 2002 $ 34,807,983 $ 40,251,665
Department of Energy note payable ("Note B"),
interest at 4%, due March 31, 2002 26,559,414 18,865,699
South Bend Development Corporation note payable
("Note I"), interest at 8%, due November, 1999 687,367 884,390
South Bend Development Corporation note payable
("Note II"), interest at 8%, due November, 1999 50,037 64,378
South Bend Development Corporation note payable
("Note III"), interest at 6%, due November, 1999 198,420 -
South Bend Development Corporation note payable
("Note IV"), interest at 6%, due November, 1999 90,107 -
New Energy Corporation of Indiana note payable
("Loan I"), interest at 8.5%, 9,490,692 8,999,342
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C>
New Energy Corporation of Indiana note payable
("Loan II") - 776,847
New Energy Corporation of Indiana note payable
("Loan III"), interest at prime plus 3% (11.25%
at December 31, 1996), due March 21, 2002 57,363 -
--------------------------
71,941,383 69,842,321
Less current portion 740,893 3,268,249
--------------------------
$ 71,200,490 $ 66,574,072
==========================
</TABLE>
38
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
3. Working Capital Loan and Long-Term Debt (continued)
On December 23, 1991, the DOE promissory note was restructured by the
execution of an Amended and Restated Loan Restructuring Agreement
("Restructuring Agreement") and two new promissory notes, Note A and Note B.
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 monthly
principal and interest payments in the amount of $631,533 during the period
January 1, 1996, through September 30, 1996. Suspended payments were to be
added monthly to the outstanding principal balance of Note B and were to
accrue interest at the Note B interest rate of 4% per annum. Note B payments
continued to be calculated and paid on a cash flow basis as defined in the DOE
Letter Agreement. The above agreements were further amended on August 23,
1996 when the Company and DOE entered into "Amendment No. 1 to the Amended and
Restated Loan Restructuring Agreement" (Amendment No. 1). Amendment No. 1
suspended Note A monthly principal and interest payments through and including
the GAIC loan maturity date and provided they be added to Note B. Note B
payments are to be calculated and paid from excess cash flow, as defined in
Amendment No. 1. Monthly Note A principal and interest payments of $631,533
are to recommence in the month following the maturity date of the GAIC loan.
Based upon present facts and circumstances, the Company has estimated that it
will not make any principal payments during 1997 under the terms of Note B.
However, as discussed in Note 1, the Company is subject to various market
factors which are outside of its control. The ultimate amount paid during
1997 will depend upon the status of market conditions on a monthly basis. In
addition, the Restructuring Agreement requires the Company to maintain cash
balances of $3,300,000 for working capital and capital expenditures. However,
Amendment No. 1 required the Company to transfer available funds from the
working capital and capital expenditure accounts into the operating accounts
prior to drawing down loans under the GAIC loan.
On March 27, 1996, the Company and the BDC entered into an agreement ("BDC
Letter Agreement") which allowed the Company to suspend all quarterly
principal and interest payments due to the BDC during the period January 1,
1996, through September 30, 1996 on Note I and Note II. Suspended payments
were evidenced by the execution of Note III, that accrues interest at a rate
of 6% per annum. On August 23, 1996, the Company and the BDC entered into an
agreement ("Third Amendment to Loan Agreement") which allows the Company to
further suspend all payments on Notes I, II, and III through and including the
maturity date of the GAIC loan. Suspended payments are added to a new note,
Note IV, which accrues interest at 6% per annum. Monthly principal and
interest payments shall commence on the first day of the month following the
GAIC loan maturity date.
39
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
3. Working Capital Loan and Long-Term Debt (continued)
The DOE and BDC August 23, 1996 agreements provide that prior to the GAIC Loan
maturity date that if any of the conditions below exist the payments described
above shall be adjusted. The above payments are adjusted if the monthly
calculation of cash flow, as defined, exceeds the interest then due and owing
on the GAIC loan; the GAIC loan has been prepaid and has no current
outstanding principal balance; and certain cash reserve balances exist, as
defined. The suspension of payment referred to above shall be all or
partially terminated for such month and such cash flow (to the extent it
exceeds the interest then due and owing on the GAIC loan, prepayment of any
outstanding balance of the GAIC Loan and the amounts of cash reserves) shall
be applied first towards the monthly $631,533 payment on Note A, second to the
monthly payment due to BDC and the balance shall be applied as a payment of
Note B. In addition, if the GAIC loan has been repaid in its entirety, the
Company has terminated the GAIC loan and the Company has on deposit certain
cash reserve balances, the suspension of the monthly payments due on Note A
shall be irrevocably terminated and the Company shall be required to resume
the monthly payments of $631,533.
The New Energy Corporation of Indiana note payable (Loan I) represents certain
cash payments made by the General Partner on behalf of the Company in
December, 1986, in fulfillment of its obligations under various financing
agreements. This amount includes the balance of cash payments totaling
$5,780,583 plus accrued interest of $3,710,109 and is due on demand with sixty
days notice. In December, 1991, as a condition to the DOE Restructuring
Agreement, the General Partner was required to contribute $578, 832 to the
Company's working capital reserves. This amount was classified as a loan
(Loan II) by the General Partner to the Company. On August 23, 1996, New
Energy Corporation of Indiana made an additional loan (Loan III) to the
Company in the amount of $500,000. The New Energy Corporation of Indiana
notes are subordinated to the GAIC, DOE and BDC notes and payment of these
notes and the related accrued interest are restricted to cash flow, as
defined, until all GAIC, DOE and BDC notes are paid. Under the terms of the
DOE Letter Agreement and Amendment No. 1, the General Partner has agreed to
further limit permitted distributions to $50,000 per month during the term of
the agreements. In 1995, the Company paid $918,000 from cash flow. Effective
in 1996, the General Partner's Board of Directors elected to offset amounts
due to the Company from the General Partner in the amount of $973,411 and
$462,617 against the balance of Loan II and Loan III, respectively.
Management has estimated, based upon present facts and circumstances, payments
of long-term debt for the next five years, excluding Note B and the New Energy
Corporation of Indiana Loans and related accrued interest, are:
1997--$740,893; 1998--$6,283,753; 1999--$6,670,586; 2000--$6,566,082; and
2001-- $7,021,073.
40
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
3. Working Capital Loan and Long-Term Debt (continued)
Interest of $353,543, $4,750,394, and $4,142,262, was paid in 1996, 1995 and
1994, respectively.
4. Employee Benefit Plans
Under the terms of the defined benefit pension plan, benefits are based upon
years of service and the highest five years of compensation during the
participants' last ten years of employment. The Company also maintains a
savings plan covering substantially all employees for which matching
contributions are provided. Company contributions are 25% of the first 6% of
an employee's salary deferral. The plans' assets are invested in cash and
cash equivalents and bond and equity mutual funds.
A summary of the components of net pension cost for the pension plan and
contributions charged to pension expense for the savings plan for the years
ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Pension Plan:
Service cost-benefits earned
during the year $ 240,165 $ 260,187 $ 246,673
Interest cost on projected benefit
obligation 179,106 166,816 143,385
Actual return on plan assets (200,155) (214,834) (19,920)
Net amortization and deferral 59,839 113,588 (62,907)
-----------------------------------
Net pension cost 278,955 325,757 307,231
Savings plan 67,321 86,821 86,467
-----------------------------------
$ 346,276 $ 412,578 $ 393,698
===================================
</TABLE>
41
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
4. Employee Benefit Plans (continued)
The following table sets forth the funded status and amounts recognized in the
balance sheets at December 31 for the defined benefit plan:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $1,488,848 and $1,266,457,
respectively $ (1,538,188) $ (1,343,800)
===================================
Actuarial present value of projected
benefit obligation for services
rendered to date $ (2,804,672) $ (2,648,014)
Plan assets at fair value 2,142,727 1,761,461
-----------------------------------
Projected benefit obligation in excess
of plan assets (661,945) (886,553)
Unrecognized net gain from past
experience and effects of changes in
assumptions (28,214) 207,651
Unrecognized transition obligation 80,909 94,393
Unrecognized prior service cost 59,646 64,234
-----------------------------------
Accrued pension costs $ (549,604) $ (520,275)
===================================
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligations was 7.5%. The rate of increase in
future compensation levels used was 5.5%. The expected long-term rate of
return on plan assets was 8.5%.
5. Partnership Interests
The Amended and Restated Limited Partnership Agreement dated October 26, 1982,
provides that allocations of income, gains, losses, deductions and credits,
and distributions to the partners shall be based on the following percentages:
<TABLE>
<CAPTION>
Limited General
Partners Partner
---------------------------
<S> <C> <C>
For all periods prior to the Conversion Date 90% 10%
For all periods after the Conversion Date 60% 40%
</TABLE>
42
<PAGE>
New Energy Company of Indiana Limited Partnership
Notes to Financial Statements (continued)
5. Partnership Interests (continued)
The "Conversion Date" will take place after the distribution of tax credits,
income, gains, losses, deductions, and distributions to the Limited Partners
reach certain levels as defined in the Amended and Restated Limited
Partnership Agreement.
Commencing October, 1989, the Special Limited Partner was eligible to receive
allocations of income, losses or distributions from the Company. The Special
Limited Partner is entitled to receive over a period of ten years out of
distributions made by the Company, equal annual installments, in preference to
distributions to other partners, a return of its capital plus a rate of return
thereon equal to 8% per year compounded annually. With the exception of
certain permitted distributions from cash flow, as defined, no distributions
can be made until the DOE notes are repaid and, accordingly, no amounts have
been distributed to date.
6. Related Party Transactions
In accordance with the terms of the Amended and Restated Limited Partnership
Agreement dated October 26, 1982, the General Partner is entitled to an annual
management fee of $850,000 plus annual increases based on the Consumer Price
Index. Total management fees accrued were $1,333,718, $1,296,531 and
$1,261,656 for 1996, 1995 and 1994, respectively. In connection with the
Restructuring Agreement, the General Partner has agreed to defer payment of
50% of the management fee, except for certain distributions from cash flow, as
defined, until such time as the DOE notes are paid in full. Under the terms
of the DOE Letter Agreement, the General Partner has agreed to limit
distributions to $50,000 per month during the term of this agreement.
Further, under the terms of the August 23, 1996, Amendment No. 1,
distributions are limited to 50% of the management fee as long as the GAIC
loan is outstanding and the General Partner has agreed that if a Default (as
defined therein) occurs and is continuing, no amount of the management fee for
such month shall be paid.
Effective in 1996, at the direction of the Board of Directors of the General
Partner, management undertook a study of expenditures to determine the
allocation of expenses between the Company and the General Partner. As a
result of this study, amounts totaling $1,436,028 were invoiced to the General
Partner and credited against selling, general and administrative expenses in
1996. This amount has been offset against amounts owed to the General
Partner.
7. Contingent Liabilities
The Company is party to various legal and environmental matters, the outcome
of which is not presently determinable. Management believes that the
resolution of these matters will not have a material impact on the financial
statements.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEW ENERGY COMPANY OF INDIANA
By: New Energy Corporation of Indiana,
General Partner
Dated: September 18, 1997 By: /s/ Larry W. Singleton
-------------- --------------------------------------
Larry W. Singleton, President
Chief Executive Officer & Treasurer
