-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vz4N9wmRsziDGdN97YynSY/wKdqOpCViNZzfMvK281Xoudp2kuak+y1revfSMP8Z mSMs18gB6DyiDmtZj6k84Q== 0000795185-97-000006.txt : 19970813 0000795185-97-000006.hdr.sgml : 19970813 ACCESSION NUMBER: 0000795185-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NRG GENERATING U S INC CENTRAL INDEX KEY: 0000795185 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 592076187 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09208 FILM NUMBER: 97656268 BUSINESS ADDRESS: STREET 1: 1221 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55403 BUSINESS PHONE: 6123735300 MAIL ADDRESS: STREET 1: 1221 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55403 FORMER COMPANY: FORMER CONFORMED NAME: O BRIEN ENVIRONMENTAL ENERGY INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: OBRIEN ENERGY SYSTEMS INC DATE OF NAME CHANGE: 19910804 10-Q 1 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 JUNE 30, 1997 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 1-9208 NRG GENERATING (U.S.) INC. (Exact name of Registrant as Specified in Charter) Delaware 59-2076187 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) ___________ 1221 Nicollet Mall, Suite 610 Minneapolis, Minnesota 55403-2445 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (612) 373-8834 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. X Yes No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. X Yes No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 6,440,514 shares of Common Stock, $0.01 par value per share, as of August 8, 1997. NRG GENERATING (U.S.) INC. FORM 10-Q June 30, 1997 INDEX Page Part I - Financial Information: Item 1. Financial Statements.......................................2 Consolidated Balance Sheets - June 30, 1997 and December 31, 1996.......................2 Consolidated Statements of Operations - Three months and six months ended June 30, 1997 and June 30, 1996...........................3 Consolidated Statements of Cash Flows - Six months ended June 30, 1997 and June 30, 1996..........4 Notes to Consolidated Financial Statements.................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................7 Part II - Other Information Item 1. Legal Proceedings.........................................14 Item 4. Submission of Matters to a Vote of Security Holders.......14 Item 6. Exhibits and Reports on Form 8-K..........................16 Signature............................................................17 Index to Exhibits....................................................18 1 PART 1 FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS NRG GENERATING (U.S.) INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
ASSETS June 30, December 31, 1997 1996 (Unaudited) Current assets: Cash and cash equivalents.................................... $ 2,177 $ 3,187 Restricted cash and cash equivalents......................... 9,332 8,174 Accounts receivable, net..................................... 10,714 11,920 Receivables from related parties............................. 64 186 Notes receivable, current.................................... 80 1,119 Inventories.................................................. 2,998 2,897 Other current assets......................................... 944 992 Total current assets....................................... 26,309 28,475 Property, plant and equipment, net............................. 129,849 132,203 Equipment held for sale........................................ 1,648 2,628 Project development costs...................................... 366 346 Notes receivable, noncurrent................................... - 83 Investments in equity affiliates............................... 4,760 3,653 Deferred financing costs, net.................................. 5,328 5,530 Other assets................................................... 667 706 Total assets............................................... $ 168,927 $ 173,624
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................. $ 3,794 $ 6,131 Accounts payable and accrued interest due NRG Energy, Inc.... 1,002 1,256 Current portion of long-term debt............................ 10,563 10,820 Accrued interest payable..................................... 267 1,104 Prepetition liabilities...................................... 538 1,433 Short-term borrowings........................................ 1,961 2,388 Other current liabilities.................................... 3,342 2,852 Total current liabilities.................................. 21,467 25,984 Loans due NRG Energy, Inc., net of current portion............. 15,488 14,388 Long-term debt, net of current portion......................... 144,545 150,311 Deferred income taxes.......................................... 13,404 13,404 Other noncurrent liabilities................................... - 50 Total liabilities.......................................... 194,904 204,137 Stockholders' equity: Preferred stock, par value $.01, 20,000,000 shares authorized; none issued or outstanding..................... - - New common stock, par value $.01, 50,000,000 shares authorized, 6,474,814 shares issued, 6,440,514 shares outstanding as of June 30, 1997 and December 31, 1996, respectively............................ 64 64 Additional paid-in capital................................... 62,719 62,719 Accumulated deficit.......................................... (88,386) (92,944) Other........................................................ (374) (352) Total stockholders' equity (deficit)....................... (25,977) (30,513) Total liabilities and stockholders' equity (deficit)....... $ 168,927 $ 173,624
The accompanying notes are an integral part of these consolidated financial statements. 2 NRG GENERATING (U.S.) INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1997 1996 1997 1996 REVENUES: Energy................................ $ 9,002 $ 11,491 $ 21,393 $ 30,624 Equipment sales and services.......... 4,586 6,660 9,192 13,025 Rental revenues....................... 467 489 927 875 Development fees and other............ - 450 - 1,122 14,055 19,090 31,512 45,646 COST OF REVENUES: Cost of energy........................ 4,072 8,218 7,232 24,312 Cost of equipment sales and services.. 3,662 5,842 7,561 11,392 Cost of rental revenues............... 440 422 823 751 Cost of development fees and other.... - 431 - 1,049 8,174 14,913 15,616 37,504 Gross profit........................ 5,881 4,177 15,896 8,142 Selling, general and administrative expenses.............. 1,663 6,075 3,916 8,481 Income (loss) from operations....... 4,218 (1,898) 11,980 (339) Interest and other income............. 231 (215) 432 1,010 Reorganization costs.................. - (4,983) - (8,251) Interest and debt expense............. (3,794) (5,119) (7,331) (9,547) Income (loss) before income taxes... 655 (12,215) 5,081 (17,127) Provision for income taxes (benefit)... 184 (504) 523 (489) Net income (loss)................... $ 471 $ (11,711) $ 4,558 $ (16,638) Net income (loss) per share............ $ 0.07 $ (2.12) $ 0.69 $ (3.61) Weighted average shares outstanding.... 6,645 5,519 6,634 4,615 The accompanying notes are an integral part of these consolidated financial statements. 3 NRG GENERATING (U.S.) INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Six Months Ended June 30, June 30, 1997 1996 Cash Flows from Operating Activities: Net income (loss).............................................. $ 4,558 $ (16,638) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.............................. 3,572 4,055 Amortization of debt discount and deferred financing costs. 202 1,261 Deferred tax benefit....................................... - (904) Project development costs expensed......................... - 180 Bankruptcy fees accrued.................................... - (1,899) Loss on disposition of property and equipment.............. 491 - Other, net................................................. (81) (3,471) Changes in operating assets and liabilities: Accounts receivable, net................................. 1,183 4,861 Inventories.............................................. (121) 748 Receivables from related parties......................... 121 601 Other assets............................................. 23 - Accounts payable and other current liabilities........... (2,067) 399 Accrued interest payable................................. (837) (3,947) Net cash provided by (used in) operating activities.... 7,044 (14,754) Cash Flows from Investing Activities: Capital expenditures........................................... (1,277) - Proceeds from disposition of property and equipment............ 600 - Investment in equity affiliates................................ (1,100) - Proceeds from sale of subsidiaries............................. - 7,500 Project development costs...................................... (15) (1,718) Collections on notes receivable................................ 1,122 790 Deposits into restricted cash accounts, net.................... (1,158) (5,151) Other, net..................................................... - 260 Net cash (used in) provided by investing activities.... (1,828) 1,681 Cash Flows from Financing Activities: Proceeds from NRG Energy, Inc. loans........................... 1,100 125,078 Proceeds from long-term debt................................... - 60,226 Repayments of NRG Energy, Inc. loans........................... - (26,398) Repayments of long-term debt................................... (6,016) (85,319) NRG capital contribution....................................... - 21,178 Net repayments of short-term borrowings........................ (415) (29) Payments on prepetition liabilities............................ (895) (70,180) Deferred financing costs....................................... - (4,579) Redemption of preferred shares................................. - (4,957) Preferred dividends paid....................................... - (57) Net cash (used in) provided by financing activities.... (6,226) 14,963 Net (decrease) increase in cash and cash equivalents............ (1,010) 1,890 Cash and cash equivalents, beginning of period.................. 3,187 3,132 Cash and cash equivalents, end of period........................ $ 2,177 $ 5,022
Supplemental disclosure of cash flow information: Interest paid during the period............................... $ 8,040 $ 9,547
The accompanying notes are an integral part of these consolidated financial statements. 4 NRG GENERATING (U.S.) INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) JUNE 30, 1997 (Dollars in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NRG Generating (U.S.) Inc. ("NRGG" or the "Company") and its subsidiaries develop and own cogeneration projects which produce electricity and thermal energy for sale to industrial and commercial users and public utilities. In addition, the Company, through its subsidiaries, sells and rents power generation, cogeneration and standby/peak shaving equipment and services. Basis of Presentation The consolidated financial statements include the accounts of all majority-owned subsidiaries of the Company. All significant intercompany investments, accounts and transactions have been eliminated. The investments in and the operating results of companies in which the Company has an ownership of 50% or less are included in the financial statements on the basis of the equity method of accounting. The accompanying unaudited consolidated financial statements and notes should be read in conjunction with the Company's Report on Form 10-K for the fiscal year ended December 31, 1996. In the opinion of management, the consolidated financial statements reflect all adjustments necessary for a fair presentation of the interim periods presented. Results of operations for an interim period may not give a true indication of results for the year. Net Income (Loss) Per Share Net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during each period. Common stock equivalents result from dilutive stock options and restricted stocks computed using the treasury stock method. In March 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" ("FAS No. 128"). FAS No. 128 applies to entities with publicly held common stock or potential common stock and is effective for financial statements issued for periods ending after December 15, 1997. Under FAS No. 128 the presentation of primary earnings per share is replaced with a presentation of basic earnings per share. FAS No. 128 requires dual presentation of basic and diluted earnings per share for entities with complex capital structures. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share. Management believes the adoption of FAS No. 128 will not have a material effect on the financial statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) JUNE 30, 1997 (Dollars in thousands) 2. LOANS DUE NRG ENERGY, INC. The loan balance due to NRG Energy, Inc. ("NRG Energy") on June 30, 1997 is $15,488. Of this balance, $14,388 has a maturity date of April 30, 2001 and $1,100 has a maturity date of June 30, 2005. The $1,100 amount was borrowed under a $10,000 loan agreement between NRGG (Schuylkill) Cogeneration, Inc. ("NSC"), a wholly-owned subsidiary of the Company, and NRG Energy. This loan agreement provides funding for the NSC capital contribution obligation to the Grays Ferry Cogeneration Partnership, for the purpose of developing, constructing, owning, maintaining and operating a 150 megawatt ("MW") natural gas and oil fired cogeneration facility to produce steam and electricity in Philadelphia. 3. PROVISION FOR INCOME TAXES No provision for federal income taxes has been recorded since the Company has net federal operating loss carryforwards which have not been recognized in prior periods. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in this Item 2 updates, and should be read in conjunction with, the information set forth in Part II, Item 7, of the Company's Report on Form 10-K for the fiscal year ended December 31, 1996. Capitalized terms used in this Item 2 which are not defined herein have the meaning ascribed to such terms in the Notes to the Company's financial statements included in Part I, Item 1 of this Report on Form 10-Q. All dollar amounts set forth in this Item 2 are in thousands. General NRG Generating (U.S.) Inc. is engaged primarily in the business of developing, owning and operating cogeneration projects which produce electricity and thermal energy for sale under long-term contracts with industrial and commercial users and public utilities. In addition to its energy business, the Company sells and rents power generation and cogeneration equipment through subsidiaries located in the United States and the United Kingdom. In its role as a developer and owner of energy projects, the Company has developed the following projects in which it currently has an ownership interest: (a) The 52 megawatt ("MW") Newark Boxboard Project (the "Newark Project"), located in Newark, New Jersey, began operations in November 1990 and is owned by the Company's wholly-owned subsidiary NRG Generating (Newark) Cogeneration Inc. ("Newark"); (b) The 122 MW E.I. du Pont Parlin Project (the "Parlin Project"), located in Parlin, New Jersey, began operations in June 1991 and is owned by the Company's wholly-owned subsidiary NRG Generating (Parlin) Cogeneration Inc. ("Parlin"); and (c) The 22 MW Philadelphia Cogeneration Project (the "Philadelphia Project"), located in Philadelphia, Pennsylvania, began operations in May 1993. The Company also owns a one-third interest in the Grays Ferry Cogeneration Partnership (the "Grays Ferry Partnership") which owns a 150 MW cogeneration project (the "Grays Ferry Project"), located in Philadelphia, Pennsylvania. The Grays Ferry Project is currently under construction with commercial operation currently expected to occur in December 1997. The Company also is currently evaluating a number of prospective projects for the purpose of determining whether to make an investment. The Company's power purchase agreements ("PPAs") with utilities have typically contained, and may in the future contain, price provisions which in part are linked to the utilities' cost of generating electricity. In addition, the Company's fuel supply prices, with respect to future projects, may be fixed in some cases or may be linked to fluctuations in energy prices. These circumstances can result in high volatility in gross profit margins and reduced operating income, either of which could have a material adverse effect on the Company's 7 financial position or results of operations. Effective April 30, 1996, the Company renegotiated its PPAs with Jersey Central Power and Light Company ("JCP&L"), the primary electricity purchaser from its Newark and Parlin Projects. Under the amended PPAs, JCP&L is responsible for all fuel supply and delivery. Under the prior PPAs the Company was responsible for such costs which were reflected in energy revenues and costs. The Company believes that this change in the PPAs will reduce volatility in gross margins by eliminating the Company's exposure to fluctuations in the price of natural gas. Although energy revenues as well as the cost of energy revenues will decline under the amended PPAs, the Company does not expect the changes made to the PPAs to have a material impact on its operating gross margins over time. However, there can be no assurance that any of the foregoing steps will improve or maintain gross profit margins in the future. Both the Newark and Parlin Projects were previously certified as qualifying facilities ("QFs") by the Federal Energy Regulatory Commission ("FERC") under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The effect of QF status is generally to exempt a project's owners from relevant provisions of the Federal Power Act, the Public Utility Holding Company Act of 1935 ("PUHCA"), and state utility-type regulation. However, as permitted under the terms of its renegotiated PPAs, Parlin has chosen to file rates with FERC as a public utility under the Federal Power Act. The effect of this filing was to relinquish the Parlin Project's claim to QF status. The FERC approved Parlin's rates effective April 30, 1996 and has determined Parlin to be an exempt wholesale generator ("EWG"). As an EWG, Parlin is exempt from PUHCA, and the ownership of Parlin by the Company does not subject the Company to regulation under PUHCA. Finally, as a seller of power exclusively at wholesale, Parlin is not generally subject to state regulation and, in any case, the Company believes that Parlin complies with all applicable requirements of state utility law. In addition to the energy business, the Company sells and rents power generation and cogeneration equipment and provides related services. The Company operates its equipment sales, rentals and services business principally through two subsidiaries. In the United States, the equipment sales, rentals and services business operates under the name of O'Brien Energy Services Company ("OES"). NRG Generating Limited, a wholly-owned United Kingdom subsidiary, is the holding company for a number of subsidiaries that operate in the United Kingdom under the common name of Puma ("Puma"). Revenues Energy revenues for the second quarter 1997 of $9,002 decreased from revenues of $11,491 for the comparable period in 1996. Energy revenues for the first six months of 1997 of $21,393 decreased from $30,624 for the comparable period in 1996. Energy revenues primarily reflect billings associated with the Parlin and Newark Projects and the Company's Philadelphia Water Department standby project. The 1996 periods presented also included revenues associated with landfill gas operations, which the Company sold April 30, 1996. The decrease in energy revenues in the quarter and six months ended June 30, 1997 as compared to the same periods one year ago was primarily attributable to the amended PPAs affecting both Parlin and Newark. 8 Revenues recognized at Parlin and Newark were $4,317 and $3,615 for the second quarter 1997 and $5,825 and $4,559 for the comparable period in 1996, respectively. Revenues recognized at Parlin and Newark were $10,606 and $8,709 for the first six months of 1997 and $16,032 and $12,345 for the comparable period in 1996, respectively. The decrease was primarily due to the amended PPAs. Energy revenues from the Company's Philadelphia Water Department standby facility project for the second quarter 1997 of $1,070 increased from revenues of $1,041 for the comparable period in 1996. Energy revenues from this project for the first six months of 1997 of $2,078 increased from the $2,031 of revenues for the comparable period in 1996. Energy revenues from the Company's landfill gas projects for the second quarter and first four months of 1996 were $66 and $216, respectively. On April 30, 1996, the landfill gas projects were sold to NRG Energy. Equipment sales and services revenues for the second quarter 1997 of $4,586 decreased from revenues of $6,660 for the comparable period in 1996. Equipment sales and services revenues for the first six months of 1997 of $9,192 decreased from the $13,025 of revenues for the comparable period in 1996. The revenue decrease in the quarter and six month periods ended June 30, 1997 from the comparable periods one year ago was primarily attributable to the sale of the Company's American Hydrotherm business in December 1996. OES equipment sales and services revenues for the second quarter 1997 of $1,440 increased from revenues of $1,059 for the quarter ended June 30, 1996. OES equipment sales and services revenues for the first six months of 1997 of $2,728 increased from the $2,069 of revenues in the six months ended June 30, 1996. The increase was primarily due to higher sales volume. As noted above, American Hydrotherm, which had revenues of $2,065 and $3,538 for the quarter and six months ended June 30, 1996, respectively, was sold in December 1996. Puma equipment sales and services revenues for the second quarter 1997 of $3,146 decreased from revenues of $3,536 for the quarter ended June 30, 1996. Puma equipment sales and services revenues for the first six months of 1997 of $6,464 decreased from the $7,418 of revenues in the six months ended June 30, 1996. The decrease was primarily due to the unfavorable impact of foreign currency rates in some of its Asian markets. Rental revenues for the second quarter 1997 of $467 decreased from revenues of $489 for the quarter ended June 30, 1996. Rental revenues for the first six months of 1997 of $927 increased from the $875 of revenues in the six months ended June 30, 1996. The deviation for each comparable period was due primarily to fluctuations in sales volume. There were no development fees and other revenues for the second quarter and first six months of 1997 compared to $450 and $1,122 for the comparable periods of 1996, respectively. The decrease was primarily attributable to the Company's assignment of contract rights for the sale of gas to the Artesia Cogeneration partnership. These contract rights were assigned in January 1997 to NRG Energy in a transaction that was approved by the Independent Committee of the Board of Directors. 9 Costs and Expenses Cost of energy revenues for the second quarter 1997 of $4,072 decreased from costs of $8,218 for the quarter ended June 30, 1996. Cost of energy revenues for the first six months of 1997 of $7,232 decreased from the $24,312 of costs in the six months ended June 30, 1996. The decreases were primarily the result of the amended PPAs in which JCP&L began assuming the cost of fuel for the Parlin and Newark facilities. Cost of equipment sales and services for the second quarter 1997 of $3,662 decreased from costs of $5,842 for the quarter ended June 30, 1996. Cost of equipment sales and services for the first six months of 1997 of $7,561 decreased from the $11,392 of costs in the six months ended June 30, 1996. The decreases were primarily due to lower costs from the Puma operations and the sale of American Hydrotherm. Cost of rental revenues for the second quarter 1997 of $440 increased from costs of $422 for the quarter ended June 30, 1996. Cost of rental revenues for the first six months of 1997 of $823 increased from the $751 of costs in the six months ended June 30, 1996. The deviation for each comparable period was due primarily to fluctuations in sales volume. There were no cost of development fees and other for the second quarter and first six months of 1997 compared to $431 and $1,049 for the comparable periods of 1996, respectively. The decrease was primarily attributable to the Company's assignment of contract rights for the sale of gas to the Artesia Cogeneration partnership. The Company's gross profit for the second quarter 1997 of $5,881 (41.8% of sales) increased from the quarter ended June 30, 1996 gross profit of $4,177 (21.9% of sales). Gross profit for the first six months of 1997 of $15,896 (50.4% of sales) increased from gross profit of $8,142 (17.8% of sales) for the six months ended June 30, 1996. The gross profit increases were primarily attributable to results from the energy segment, including particularly fluctuations in the recovery of fuel costs through energy revenues under the Parlin and Newark Project PPAs in effect until April 30, 1996. Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") for the second quarter 1997 of $1,663 decreased from the quarter ended June 30, 1996 SG&A expenses of $6,075. SG&A for the first six months of 1997 of $3,916 decreased from SG&A of $8,481 for the six months ended June 30, 1996. The reductions were primarily due to a $3,100 cost incurred in the quarter ended June 30, 1996 to terminate the interest rate swap agreement in connection with the refinancing of Parlin nonrecourse project debt. Fiscal 1997 SG&A expenses benefited from lower payroll costs and related tax costs as well as reduced insurance expenses and legal fees. 10 Interest and Other Income Interest and other income for the second quarter 1997 of $231 increased from interest and other income of $(215) for the quarter ended June 30, 1996. Interest and other income for the first six months of 1997 of $432 decreased from interest and other income of $1,010 for the six months ended June 30, 1996. The increase for the comparable quarters was primarily due to the net costs associated with the landfill gas projects sold to NRG Energy on April 30, 1996. The decrease for the comparable six month periods was primarily attributable to a one time gain of $1,000 in the quarter ended March 31, 1996 for the admission of a third partner into the Grays Ferry Partnership offset in part by the net costs associated with the sale of the landfill gas projects. During the first quarter 1997 the Company recognized a gain from the sale of its interest in a development project in Pakistan. This gain was offset by a loss on the sale of unused equipment. Reorganization Costs Reorganization costs represent all costs incurred after filing for bankruptcy that relates to the Company's reorganization and restructuring efforts. Reorganization costs for the quarter and six months ended June 30, 1996 were $4,983 and $8,251, respectively. These costs consist primarily of professional and administrative fees and expenses. Interest and Debt Expense Interest and debt expense for the second quarter 1997 of $3,794 decreased from second quarter 1996 interest and debt expense of $5,119. Interest and debt expense for the first six months of 1997 of $7,331 decreased from interest and debt expense of $9,547 for the six months ended June 30, 1996. The decreases were due primarily to post- petition interest on prepetition liabilities included in the quarter and six month periods ended June 30, 1996. In addition, the average interest rate was lower in the quarter and six month periods ended June 30, 1997 than in the comparable periods one year ago due to the refinancing of the Newark and Parlin Projects. Income Taxes The provision for income taxes for the quarter and six months Ended June 30, 1997 relates primarily to state income taxes on earnings of the Company's subsidiaries. Net Income (Loss) Per Share Net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares of common stock and common stock equivalents outstanding. Fully dilutive net income (loss) per share is not presented because conversion of any common stock equivalents does not have a material dilutive effect on reported net income (loss) per share. Weighted average shares increased for the quarter and six month periods ended June 30, 1997 from the comparable periods one year ago 11 primarily due to the purchase of 2,710,357 common shares by NRG Energy on April 30, 1996. Liquidity and Capital Resources In May 1996, the Company's wholly-owned subsidiaries Newark and Parlin entered into a Credit Agreement (the "Credit Agreement") which established provisions for a $155,000 fifteen-year loan (of which $147,250 was outstanding at June 30, 1997) and a $5,000 five-year debt service reserve line of credit. The interest rate on the outstanding principal is variable based on, at the option of Newark and Parlin, LIBOR plus a 1.125% margin or a defined base rate plus a 0.375% margin, with nominal margin increases in the sixth and eleventh year. Concurrent with the Credit Agreement, Newark and Parlin entered into an interest rate swap agreement with respect to 50% of the principal amount outstanding under the Credit Agreement. This interest rate swap agreement fixes the interest rate on the 50% portion of the principal amount outstanding at 6.9% plus the margin. NRGG Schuylkill Cogeneration, Inc. (formerly known as O'Brien (Schuylkill) Cogeneration, Inc.) ("NSC"), a wholly-owned subsidiary of the Company, owns a one-third partnership interest in the Grays Ferry Project currently under construction. In March 1996, the partnership entered into a credit agreement with Chase Manhattan Bank N.A. to finance the project. The credit agreement obligates each of the project's three partners to make a $10,000 capital contribution prior to the commercial operation of the facility, which is anticipated to occur by the end of 1997. NRG Energy has provided additional loan commitments to the Company. A $10,000 loan agreement negotiated between NRG Energy and NSC provides funding, if needed, for a NSC capital contribution obligation to the Grays Ferry Partnership. At June 30, 1997, NSC had borrowed $1,100 from NRG Energy under this loan agreement. At June 30, 1997, loans of $14,388 remained outstanding to NRG Energy under another loan agreement. The Company and NRG Energy have entered into a Co-Investment Agreement pursuant to which NRG Energy has agreed to offer to the Company ownership interests in certain power projects which are initially developed by NRG Energy or with respect to which NRG Energy has entered into a binding acquisition agreement with a third party. If any eligible project reaches certain contract milestones (which include the execution of a binding PPA and fuel supply agreement and the completion of a feasibility and engineering study) by April 30, 2003, NRG Energy has agreed to offer to sell to the Company all of NRG Energy's ownership interest in such project. Eligible projects include, with certain limited exceptions, any proposed or existing electric power plant within the United States NRG Energy initially develops or in which NRG Energy proposes to acquire an ownership interest. NRG Energy is obligated under the Co-Investment Agreement to offer to the Company, during the three year period ending on April 30, 1999, projects with an aggregate equity value of at least $60,000 or a minimum of 150 net MW. To facilitate the Company's ability to acquire ownership interests which may be offered pursuant to its Co-Investment Agreement, NRG Energy has agreed to finance the Company's purchase of such ownership interests at commercially 12 competitive terms to the extent funds are unavailable to the Company on comparable terms from other sources. Any such financing provided by NRG Energy under the terms of the Co-Investment Agreement is required to be recourse to the Company and secured by a lien on the ownership interest acquired. Such financing also is required to be repaid from the net proceeds received by the Company from offerings of equity or debt securities of the Company (when market conditions permit such offerings to be made on favorable terms) after taking into account the working capital and other cash requirements of the Company as determined by its Board of Directors. Except for the historical information contained within this Management's Discussion and Analysis of Financial Condition and Results of Operations, the accompanying consolidated financial statements, and the Notes to Consolidated Financial Statements, the matters reflected or discussed in this report which relate to the Company's beliefs, expectations, plans, future estimates and the like are forward-looking statements that involve risks and uncertainties including but not limited to: business conditions and growth in the general economy; regulatory and other legal developments affecting the markets in which the Company operates and changes in environmental laws; volatility in gross margins caused by seasonal factors that cannot be controlled by the Company; competitive factors, such as price pressures and other factors which may make it more difficult for the Company to secure future projects and may increase project development costs and/or reduce operating margins; the success of the Company's business partners, including its energy customers and fuel suppliers; the successful completion of the Grays Ferry Project; the successful completion and addition of new energy projects and various other factors including without limitation those discussed in this report and the Company's Report on Form 10-K for the fiscal year ended December 31, 1996 under the caption "Item 1. Business - Risk Factors." Such factors may cause the Company's actual results to differ materially from those discussed herein and in forward-looking statements made herein. 13 PART II OTHER INFORMATION ITEM 1 Legal Proceedings. There have been material developments in the following legal proceedings of the Company or a subsidiary which have previously been reported in the Company's Report on Form 10-K for the transition period ended December 31, 1996: 1. Calpine Corporation v. NRG Generating (Parlin) Cogeneration Inc., Superior Court of Essex County, New Jersey, Civil Action File No. ESX-L-6905-96, filed June 19, 1996. This was a dispute over the purchase of certain accounts receivable allegedly owed by the Company. On May 15, 1997, the Company settled this claim for a payment of $730,000. This settlement did not have a material adverse effect on the business or financial condition of the Company. 2. GEC Alsthom, International, Inc. v. O'Brien Energy Services Co., Stewart & Stevenson Operations, Inc., and ABC Company (fictitious), Superior Court of Essex County, New Jersey, Civil Action File No. L-7389-95, filed June 16, 1995. This action arose out of the purchase of materials and services from a vendor to make repairs in connection with a fire that occurred at the Company's Newark turbine generator facility on December 25, 1992. The Plaintiff claims that the Company has failed to meet monetary obligations aggregating approximately $155,000 under the alleged agreement, and the Company has filed counter-claims alleging that the Plaintiff failed to properly install certain equipment which led to failures at the turbine generator facility. On June 9, 1997, the Company settled this claim for a net payment of $115,000. This settlement did not have a material adverse effect on the business or financial condition of the Company. The Company is party to other legal proceedings, but the Company believes that the outcome of these matters (either individually or in the aggregate) will not have a material adverse effect on the business or financial condition of the Company. ITEM 4 Submission of Matters to a Vote of Security Holders. At the Annual Meeting of Stockholders of the Company held on May 22, 1997 (the "Meeting"), the following directors were elected, each of whom will serve until the 1998 annual meeting of stockholders and until his successor is elected and qualified: Nominee Affirmative Negative Votes Votes Abstentions Leonard A. Bluhm 5,717,429 9,571 - Lawrence I. Littman 5,718,956 8,044 - Craig A. Mataczynski 5,718,956 8,044 - David H. Peterson 5,718,956 8,044 - Robert T. Sherman, Jr. 5,718,956 8,044 - Spyros S. Skouras, Jr. 5,718,956 8,044 - Charles J. Thayer 5,718,956 8,044 - Ronald J. Will 5,718,956 8,044 - 14 In addition, the following proposals were approved at the Meeting: Approval of the Company's 1997 Stock Option Plan authorizing the Company to grant options to purchase up to 250,000 shares of the Company's Common Stock to members of the Board of Directors, officers and key employees of the Company or its subsidiaries. Affirmative Negative Votes Votes Abstentions 5,719,569 3,323 4,108 Ratification of the selection of Price Waterhouse LLP as the Company's independent public accountants. Affirmative Negative Votes Votes Abstentions 5,493,478 150,548 22,035 15 ITEM 6 Exhibits and Reports on Form 8-K. (a) Exhibits The "Index to Exhibits" following the signature page is incorporated herein by reference. (b) Reports on Form 8-K The following Reports on Form 8-K were filed by the registrant during the fiscal quarter ended June 30, 1997: 1. Current Report on Form 8-K dated April 7, 1997, reporting information under Item 5. 16 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 hereunto duly authorized. NRG GENERATING (U.S.), INC. Registrant Date: August 12, 1997 By: /s/ Timothy P. Hunstad Timothy P. Hunstad Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) 17 INDEX TO EXHIBITS 3.1 Amended and Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated April 30, 1996 and incorporated herein by this reference. 3.2 Bylaws of the Company filed as Exhibit 3.2 to the Company's Current Report on Form 8-K dated April 30, 1996 and incorporated herein by this reference. 10.1 NRG Generating (U. S.) Inc. 1997 Stock Option Plan filed as Appendix A to the Company's Proxy Statement dated April 24, 1997 and incorporated herein by this reference. 11 Computation of Earnings Per Common Share 27 Financial Data Schedule (for SEC filing purposes only) 18 EX-11 2 EXHIBIT 11 EXHIBIT 11.0 NRG Generating (U. S.) INC. Computation of Earnings Per Common Share (Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1997 1996 1997 1996 Net income (loss) applicable to common shares: Net income (loss) $ 471 $ (11,711) $ 4,558 $ (16,638) Primary: Shares for common and common share equivalent earnings (loss) per share (1): Weighted average number of common shares outstanding 6,440,514 5,518,562 6,440,514 4,615,109 Dilutive effect of outstanding stock options and warrants 204,438 0 193,286 0 6,644,952 5,518,562 6,633,800 4,615,109 Net income (loss) per common share and common share equivalents $ 0.07 $ (2.12) $ 0.69 $ (3.61) Fully Diluted: Shares for common and common share equivalent earnings (loss) per share (2): Weighted average number of common shares outstanding 6,440,514 5,518,562 6,440,514 4,615,109 Dilutive effect of outstanding stock options and warrants 215,717 0 211,124 0 6,656,231 5,518,562 6,651,638 4,615,109 Net income (loss) per common share and common share equivalents $ 0.07 $ (2.12) $ 0.69 $ (3.61) (1) Outstanding stock options, warrants, and shares issuable under employee stock purchase plans are converted to common share equivalents by the treasury stock method using the average market price of the Company's shares during each period. (2) Outstanding stock options, warrants, and shares issuable under employee stock purchase plans are converted to common share equivalents by the treasury stock method using the greater of the average market price or the period-end market price of the Company's shares during each period.
EX-27 3 ARTICLE 5 - FINANCIAL DATA SCHEDULE FOR SECOND QUARTER OF FISCAL YEAR 1997 OF NRG GENERATING (U. S.) INC.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FINANCIAL STATEMENTS FOR ITS SECOND QUARTER OF FISCAL YEAR 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS Dec-31-1997 Jun-30-1997 11,509 0 10,714 0 2,998 26,309 129,849 0 168,927 21,467 0 64 0 0 (26,041) 168,927 31,512 31,512 15,616 15,616 3,484 0 7,331 5,081 523 4,558 0 0 0 4,558 0.69 0.69
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