-----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, NWdQvbDFi7cHZUwFG+mm8dwEP40bvwFhIhpq/68sh5G+G0RulPzWS6k0JdPht/5E v8NCdO6DXzzZUdkFTCoN5Q== 0000925655-98-000021.txt : 19980814 0000925655-98-000021.hdr.sgml : 19980814 ACCESSION NUMBER: 0000925655-98-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIGEN ENERGY CORP CENTRAL INDEX KEY: 0000925655 STANDARD INDUSTRIAL CLASSIFICATION: STEAM & AIR CONDITIONING SUPPLY [4961] IRS NUMBER: 133378939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13264 FILM NUMBER: 98686637 BUSINESS ADDRESS: STREET 1: ONE WATER ST CITY: WHITE PLAINS STATE: NY ZIP: 10601 BUSINESS PHONE: 9142866600 MAIL ADDRESS: STREET 1: ONE WATER ST CITY: WHITE PLAINS STATE: NY ZIP: 10601 10-Q 1 QUARTER ENDING 6/30/98 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 No. 1-13264 TRIGEN ENERGY CORPORATION (Exact name of Registrant as specified in its charter) Delaware 13-3378939 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Water Street White Plains, New York 10601-1009 (Address of principal executive offices) (Zip Code) (914) 286-6600 (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 ----- ----- There were 12,347,227 shares of the Registrant's Common Stock outstanding as of July 30, 1998. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q Quarter Ended June 30, 1998 Part I - Financial Information: Page Item 1. Financial Statements Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1998 and 1997 (Unaudited) 3 Consolidated Balance Sheets as of June 30, 1998 (Unaudited) and December 31, 1997 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3.Quantitative and Qualitative Disclosures About Market Risk. 12 Part II - Other Information: 13 Signatures: 14 Disclosure Regarding Forward-Looking Statements This Quarterly Report includes historical information as well as statements regarding the future expectations (referred to as "forward-looking statements") of Trigen Energy Corporation and its wholly owned subsidiaries (collectively "Trigen"). Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include: supply/demand balance for Trigen's products, competitive pricing pressures, weather patterns, changes in industry laws and regulations, adverse judicial determinations, competitive technology and any failure to achieve Trigen's cost reduction targets or complete construction projects on schedule. Trigen believes in good faith that the forward-looking statements in this Quarterly Report have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the records of Trigen and other data available from third parties, but there can be no guarantee that the expectations described in these forward looking statements will be fulfilled or accomplished. Part I - Financial Information Item 1. Financial Statements
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Six Months Ended June 30, 1998 and 1997 Unaudited (In thousands, except per share data) Three Months Six Months 1998 1997 1998 1997 Revenues Thermal energy $37,068 $34,129 $97,278 $100,453 Electric energy 8,880 11,474 20,209 25,562 Equity in earnings/(losses) of non-consolidated partnerships 1,323 (803) 2,026 (693) Fees earned and other revenues 3,523 3,307 6,193 6,306 ------- ------- ------- -------- Total revenues 50,794 48,107 125,706 131,628 ------- ------- ------- -------- Operating expenses Fuel and consumables 16,582 19,974 51,527 66,477 Production and operating costs 12,058 10,891 27,138 25,073 Depreciation 4,449 3,526 9,919 8,290 General and administrative 11,595 7,542 21,218 17,037 ------- ------- ------- -------- Total operating expenses 44,684 41,933 109,802 116,877 ------- ------- ------- -------- Operating income 6,110 6,174 15,904 14,751 Other income (expense) Interest expense (5,826) (4,647) (11,567) (9,126) Other income, net 4,313 442 4,599 865 ------- ------- ------- -------- Earnings before minority interests, income taxes and extra- ordinary item 4,597 1,969 8,936 6,490 Minority interests in earnings of subsidiaries 782 795 1,575 1,529 ------ ------- ------- ---------- Earnings before income taxes and extraordinary item 3,815 1,174 7,361 4,961 Income taxes 1,640 481 3,165 2,034 ------ ------- ------- ---------- Earnings before extra- ordinary item 2,175 693 4,196 2,927 Extraordinary loss from extinguishment of debt, net of tax benefit -- -- (299) -- ------- -------- ------- ---------- Net earnings $2,175 $ 693 $3,897 $ 2,927 ------- ------- ------ ---------- Basic earnings per common share Before extraordinary item $ .18 $ .06 $ .35 $ .24 Extraordinary loss -- -- ( .03) -- ------- ------- ------ ---------- Net earnings $ .18 $ .06 $ .32 $ .24 ------- ------- ------ ---------- Diluted earnings per common share Before extraordinary item $ .18 $ .06 $ .35 $ .24 Extraordinary loss -- -- ( .03) -- ------- ------- ------ ---------- Net earnings $ .18 $ .06 $ .32 $ .24 ------- ------- ------ ---------- Average shares outstand- ing - basic 12,031 12,012 12,017 11,998 ------- ------- ------ ---------- Average shares outstand- ing - diluted 12,031 12,117 12,019 12,173 ------- ------- ------ ---------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, December 31, 1998 1997 (Unaudited) Assets Current assets Cash and cash equivalents $ 12,431 $ 8,967 Accounts receivable Trade (less allowance for doubtful accounts of $1,371 in 1998 and $1,074 in 1997) 23,775 34,866 Other 11,461 10,815 -------- -------- Total accounts receivable 35,236 45,681 Inventories 6,641 7,054 Prepaid expenses and other current assets 8,901 7,985 -------- -------- Total current assets 63,209 69,687 Non-current cash and cash equivalents 4,671 4,726 Property, plant and equipment, net 431,510 388,448 Investment in non-consolidated partnerships 22,515 19,560 Intangible assets, net 42,054 21,454 Deferred costs and other assets, net 23,789 22,094 -------- -------- Total assets $587,748 $525,969 -------- -------- Liabilities and Stockholders' Equity Current liabilities Short-term debt $ -- $ 14,200 Current portion of long-term debt 15,471 14,499 Accounts payable 3,778 10,053 Accrued fuel 10,606 11,545 Accrued expenses and other current liabilities 29,081 21,485 -------- -------- Total current liabilities 58,936 71,782 Long-term debt 320,173 256,361 Other liabilities 5,062 4,786 Deferred income taxes 38,207 31,237 -------- -------- Total liabilities 422,378 364,166 Minority interests in subsidiaries 16,348 16,321 Stockholders' equity Preferred stock-$.01 par value, authorized and unissued 15,000,000 shares -- -- Common stock-$.01 par value, authorized 60,000,000 shares, issued 12,417,934 shares in 1998 and 12,070,162 shares in 1997 124 121 Additional paid-in capital 120,857 114,157 Retained earnings 34,915 31,881 Unearned compensation - restricted stock ( 5,557) -- Cumulative translation adjustment 315 296 Treasury stock, at cost, 88,965 shares in 1998 and 45,500 shares in 1997 ( 1,632) (973) --------- --------- Total stockholders' equity 149,022 145,482 -------- -------- Total liabilities and stockholders' equity $587,748 $525,969 -------- -------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1998 and 1997 Unaudited (In thousands) 1998 1997 ---- ----- Cash flows from operating activities Net earnings $ 3,897 $2,927 Reconciliation of net earnings to cash provided by operating activities Extraordinary item 299 -- Depreciation and amortization 12,617 10,038 Deferred income taxes 202 433 Provision for doubtful accounts 269 317 Minority interests in subsidiaries 1,575 1,529 Changes in assets and liabilities Accounts receivable 10,181 1,931 Inventories and other current assets 417 (973) Accounts payable and other current liabilities ( 1,364) (2,322) Noncurrent assets and liabilities ( 3,457) (1,334) ------- ------ Net cash provided by operating activities 24,636 22,546 ------- ------ Cash flows from investing activities Acquisition of Power Sources, Inc. (44,100) -- Capital expenditures (20,133) (13,947) Investment in non-consolidated partnerships ( 990) (1,100) ------- ------ Net cash used in investing activities (65,223) (15,047) ------- ------ Cash flows from financing activities Short-term debt, net (14,200) (18,500) Proceeds of long-term debt 84,850 43,978 Payments of long-term debt (24,356) (34,919) Dividends paid ( 863) (841) Issuance of common stock, net 115 1,292 Distribution to minority interests ( 1,550) (900) ------- ------ Net cash provided by (used in) financing activities 43,996 (9,890) ------- ------ Cash and cash equivalents Increase (decrease) 3,409 (2,391) At beginning of period 13,693 25,276 ------- ------ At end of period $17,102 $22,885 ------- ------ Current $12,431 $14,053 Non current 4,671 8,832 ------- ------ At end of period $17,102 $22,885 ------- ------ Supplemental disclosure of cash flow information Cash paid during the period for Interest $10,606 $8,320 ------- ------ Income taxes 1,421 2,264 ------- ------ See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Trigen Energy Corporation (the "Company"), develops, owns and operates commercial and industrial energy systems in the United States and Canada. The Company uses its expertise in thermal engineering and proprietary cogeneration processes to convert fuel to various forms of thermal energy and electricity. The Company combines heat and power generation, producing electricity as a by-product, for use in its facilities and for sale to customers. The consolidated financial statements of Trigen Energy Corporation and its subsidiaries presented herein are unaudited. However, such information reflects all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position as of June 30, 1998, and the results of operations for the three and six months ended June 30, 1998 and 1997 and the cash flows for the six months ended June 30, 1998 and 1997. The results of operations for the three and six month periods ended June 30, 1998 and cash flows for the six month period ended June 30, 1998 are not indicative of those to be expected for the year ending December 31, 1998. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1997 included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 presentation. 2. Change in Accounting Policy In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires costs of start-up activities and organizational costs to be expensed as incurred. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998. Earlier application of SOP 98-5 is encouraged in fiscal years for which annual financial statements have not yet been issued. The Company is in process of evaluating the impact SOP 98-5 will have on the Company's results of operations and financial condition. 3. Supplementary Income Information Included in other income, net for the three months and six months ended June 30, 1998 were gains of $2,102,000 from the sale of nitrogen oxide emission allowances and $1,678,000 from an insurance settlement. 4. Extraordinary Item The Company incurred an extraordinary charge of $299,000, net of a tax benefit of $161,000, in the six months ended June 30, 1998 in connection with the early retirement of debt. 5. Acquisition On January 22, 1998, the Company acquired all of the capital stock of Power Sources, Inc. (renamed Trigen-BioPower, Inc.), a biomass-to-energy power plant developer and operator, for a total cash investment of $44,100,000, funded from the Company's existing credit facility. Trigen-BioPower had revenues of $18,967,000 and net earnings of $2,441,000 for the twelve-month period ended December 31, 1997. Results for Trigen-Bio-Power are included with those of the Company since the date of acquisition. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) The acquisition was accounted for under the purchase method of accounting. The purchase price has been allocated to the assets acquired and liabilities assumed based on fair market value at the date of acquisition. The excess of the purchase price over the net assets acquired was $10,398,000 and is being amortized over a period not exceeding 30 years. The fair value of the assets acquired and liabilities assumed is as follows (in thousands): Current assets $ 3,325 Property, plant and equipment 32,265 Intangibles 11,687 Costs in excess of net assets acquired 10,398 Current liabilities ( 2,147) Long-term debt ( 4,290) Other liabilities ( 7,138) -------- Total purchase price $44,100 -------- The following pro forma summary presents the consolidated results of operations for the three and six months ended June 30, 1997 and the six months ended June 30, 1998 as if the acquisition had occurred at the beginning of the years presented (in thousands, except per share data): Three Months Six Months Ended Ended June 30, June 30, ------------------- 1997 1998 1997 -------- ---- ---- Revenues $52,625 126,843 $141,064 Earnings before extraordinary item 724 4,266 3,253 Diluted earnings per common share -- before extraordinary item .06 .35 .27 The pro forma results included certain adjustments for depreciation expense as a result of a step up in the basis of property, plant and equipment and an increase in the remaining lives, amortization expense as a result of goodwill and other intangible assets and interest expense on borrowings to finance the acquisition. The pro forma results do not purport to be indicative of the results of operations which actually would have resulted had the acquisition been made at the beginning of the years presented, or of results which may occur in the future. 6. Legal Proceeding On April 9, 1998, Grays Ferry Cogeneration Partnership, Trigen-Schuylkill Cogeneration, Inc., CogenAmerica Schuylkill Inc. (formerly NRGG Schuylkill Cogeneration Inc.) and Trigen-Philadelphia Energy Corporation commenced an action against PECO Energy Company ("PECO") and Adwin (Schuylkill) Cogeneration, Inc. in the Pennsylvania Court of Common Pleas of Philadelphia County (the "Court"). Grays Ferry Cogeneration Partnership (the "Partnership") is the owner of the Grays Ferry Cogeneration Facility located in Philadelphia, Pennsylvania. At June 30, 1998, the Company had an investment of $14,705,000 in the Partnership, representing a one third interest in the Partnership through its wholly owned subsidiary, Trigen-Schuylkill Cogeneration, Inc. CogenAmerica Schuylkill Inc. and Adwin (Schuylkill) Cogeneration, Inc. own the other two thirds interests in the Partnership. Adwin (Schuylkill) Cogeneration, Inc. is an indirect wholly owned subsidiary of PECO. In addition, at June 30, 1998 the Company had a receivable of $4,437,000 due from the Partnership. Included in the Company's earnings before income taxes for the three months and six months ended June 30, 1998 was the Company's TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) share of Partnership earnings of $1,719,000 and $2,705,000, respectively, and fees earned from the Partnership of $1,024,000 and $1,452,000, respectively. This compared to fees earned from the Partnership of $175,000 and $325,000 in the three months and six months ended June 30, 1997, respectively. The Partnership commenced this action in reaction to the wrongful termination by PECO on March 3, 1998, of the electric power purchase agreement between the Partnership and PECO (the "Power Purchase Agreement"). The Partnership is seeking a declaratory judgement to require PECO to comply with the Power Purchase Agreement and for damages to be proven at trial in an amount in excess of $200 million. On May 6, 1998, the Court issued a preliminary injunction against PECO which requires PECO to pay the Partnership for its electric energy and capacity at the rates set forth in the Power Purchase Agreement and otherwise to specifically perform the Power Purchase Agreement. On July 7, 1998, PECO withdrew its appeal of the preliminary injunction, which will now remain in effect until the Court renders its decision after the final hearing of this matter. The final hearing is currently scheduled to occur in March of 1999. The Chase Manhattan Bank has issued notices of default to the Partnership under the terms of the Credit Agreement, dated as of March 1, 1996, between the Partnership, The Chase Manhattan Bank, as agent and certain other commercial banks (collectively the "Banks"). The Partnership's debt under the Credit Agreement of $106,929,000 is secured only by the Partnership assets and the partners' ownership interests in the Partnership. The Banks have not accelerated the debt owing under the Credit Agreement nor imposed default interest charges against the Partnership, although the Banks could take these actions in the future. The Banks have required to date, and may require in the future, the Partnership to apply available cash held by Partnership (net of operating expenses, other than certain payments to affiliates, and expenses required to complete construction) toward repayment of the principal amount of the loans outstanding. The Company believes that PECO's termination of the Power Purchase Agreement was wrongful and the Company intends to aggressively pursue the remedies available to it. In the event the Company is not successful and PECO's actions are upheld, PECO would be required under PURPA to continue to purchase power from the Grays Ferry Cogeneration Facility at PECO's avoided cost. This would generate significantly lower earnings per share for the Company than the 1998 annual earnings per share of $.40 to $.52 that the Company previously forecast, based on the contracted power purchase price. While it is possible that the Company's investment in the Partnership and the receivable from the Partnership could become impaired, at this time the Company does not believe that is likely. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) 7. Comprehensive Income Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This statement requires disclosure of all items recognized under accounting standards as components of comprehensive income. Following are the Company's components of comprehensive income for the three and six months ended June 30, 1998 and 1997 (in thousands). Three MonthsEnded Six Months Ended June 30, June 30, ----------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Net earnings $2,175 $ 693 $3,897 $2,927 Other comprehensive Income Cumulative translation adjustment 22 -- 19 39 Comprehensive income $2,197 $ 693 $3,916 $2,966 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months ended June 30, 1998 compared with Three Months ended June 30, 1997. Overview - -------- For the quarter ended June 30, 1998, the Company reported earnings before extraordinary item of $2.2 million or $.18 per diluted share. This compared with $.7 million and $.06 of diluted earnings per share in the second quarter of 1997. Revenues were $50.8 million in the second quarter compared with $48.1 million last year. Operating income was $6.1 million and the operating margin was 12.0% in the second quarter of 1998 compared with operating income of $6.2 million and an operating margin of 12.8% in the like quarter last year. Operating results for 1998 include those of the newly acquired Trigen-BioPower from January 22, 1998, the date of acquisition. Trigen-BioPower contributed $4.6 million in revenues and $1.0 million in operating income to second quarter operating results. A significant portion of the Company's revenues and profits are subject to seasonal fluctuation due to peak heating demand in the winter and peak cooling demand in the summer. Revenues Revenues of $50.8 million were up $2.7 million from the second quarter of 1997. Thermal energy sales increased $2.9 million reflecting the $4.6 million revenue contribution by Trigen-BioPower. A decline in units of thermal energy sold at systems in Baltimore, Philadelphia and St. Louis offset in part the higher thermal energy sales. Electric energy sales were $8.9 million, down $2.6 million from the like quarter in 1997. This decline was due to the trigenera- tion plant in Nassau County, New York being taken off line for 22 days during the second quarter for major overhaul work. The increase in earnings/(losses) of non-consolidated partnerships results from recognition of $1.7 million of earnings from the Grays Ferry Cogeneration Partnership. Operating Expenses Fuel and consumables' costs were $16.6 million in the second quarter compared with $20.0 million last year. This decrease was due to the lower level of thermal energy revenues at systems principally located in the Northeast, the outage at the Nassau plant and savings realized from the purchase of a fuel management contract in 1997. Production and operating costs increased 11% to $12.1 million in the second quarter due mainly to the inclusion of production and operating costs for Trigen-BioPower. Depreciation expense was $4.4 million compared with $3.5 million in 1997. The increase reflects the higher level of capital expenditures and depreciation expense of Trigen-BioPower. General and administrative expenses were up $4.1 million in the quarter due primarily to a $2.0 million increase in insurance and employee-related costs and to the inclusion of general and administrative expenses for Trigen-BioPower. Interest Expense Interest expense increased $1.2 million to $5.8 million in the second quarter reflecting the increased level of borrowing, primarily the $44.1 million of borrowings under the Company's credit facility to finance the Trigen-BioPower acquisition. Other Income, Net The $3.9 million increase in other income, net in the second quarter results from gains of $2.1 million from the sale of nitrogen oxide emission allowances and $1.7 million from an insurance settlement. The agreements for the sale of nitrogen oxide emissions allowances anticipate that regulations establishing a nitrogen oxide emissions allowances trading system will be established by the United States Environmental Protection Agency (the "EPA") for an area which includes the States where the subject nitrogen oxide emissions allowances will be used. In the event that the EPA fails to adopt such regulations, these sales may be rescinded. Income Taxes The Company's effective tax rate is determined primarily by the federal statutory rate of 35%, and state and local income taxes. The effective income tax rate for the second quarter of 1998 and 1997 was 43.0% and 41.0%, respec- tively. Six months ended June 30, 1998 compared with six months ended June 30, 1997. Overview - -------- For the six months ended June 30, 1998, the Company reported earnings before extraordinary item of $4.2 million or $.35 per diluted share. This compared with $2.9 million and $.24 per diluted earnings per share last year. Operating income was $15.9 million on revenues of $125.7 million in the first six months of 1998 compared with operating income of $14.8 million on revenues of $131.6 million in 1997. The operating margin was 12.7% in 1998 compared with 11.2% in 1997. Trigen-BioPower contributed $8.3 million in revenues and $1.9 million in operating income to operating results for the six months ended June 30, 1998. Revenues Revenues of $125.7 million were down $5.9 million or 4% from 1997. Thermal energy sales were down $3.2 million to $97.3 million and electric energy sales were down $5.4 million to $20.2 million. The decline in thermal energy sales was due principally to the mild winter weather, particularly in the Northeast, that adversely impacted our energy systems in Baltimore, Boston, Philadelphia and St. Louis. The decline in thermal energy sales was partially offset by the $8.3 million revenue contribution of Trigen-BioPower. Electric energy sales were down as a result of the Nassau plant being taken off line by the local utility, as permitted under the contract, for a longer period of time in 1998 than in 1997. Also in 1998, this facility was taken off line for 22 days for major overhaul work. The increase in earnings /(losses) of non-consolidated partnerships results from recognition of $2.7 million of earnings from the Grays Ferry Cogeneration Partnership. Operating Expenses Fuel and consumables' costs were $51.5 million in 1998 compared with $66.5 million last year. This decrease reflects the lower level of energy revenues at systems primarily located in the Northeast, the outages at the Nassau plant and savings realized from the purchase of a fuel management contract in 1997. Production and operating costs increased 8% to $27.1 million due mainly to the inclusion of production and operating costs for Trigen-BioPower. Depreciation expense was $9.9 million compared with $8.3 million last year. The increase reflects the higher level of capital expenditures and depreciation expense of Trigen-BioPower. General and administrative expenses increased $4.2 million in the first six months of 1998 due primarily to a $2.0 million increase in insurance and employee-related costs and to the inclusion of general and administrative expenses for Trigen-BioPower. Interest Expense Interest expense increased $2.4 million to $11.6 million in 1998 due to the increased level of borrowing, primarily the $44.1 million of borrowings to finance the Trigen-BioPower acquisition. Other Income, Net The $3.7 million increase in other income, net results from gains of $2.1 million from the sale of nitrogen oxide emission allowances and $1.7 million from an insurance settlement. Income Taxes The Company's effective tax rate was 43% for the first six months of 1998 compared with 41% last year. Extraordinary Item The Company incurred an extraordinary charge of $.3 million, net of a $.2 million income tax benefit, in the first quarter of 1998 in connection with the early retirement of debt. Liquidity and Financial Position Cash and cash equivalents were $17.1 million at June 30, 1998, an increase of $3.4 million from year-end 1997. Working capital was $4.3 million compared with a negative $2.1 million at December 31, 1997. At June 30, 1998, receivables were down 23% to $35.2 million and inventories decreased 6% to $6.6 million from the balances at the end of 1997. Accounts payable was down $6.3 million to $3.8 million, and accrued expenses and other current liabilities were up $7.6 million to $29.1 million at June 30, 1998. The Company's working capital requirements vary in line with the peak heating demand in the winter and peak cooling demand in the summer. During the first six months of 1998, the Company generated $24.6 million of cash from operating activities compared with $22.5 million last year. The improvement was due to the cash generated by Trigen-BioPower and improved net earnings. During the first six months of 1998, the Company acquired Trigen- BioPower for $44.1 million, invested $20.1 million in capital expenditures and $1.0 million in partnership investments, and paid dividends of $.9 million to shareholders and $1.6 million to minority interests. These expenditures were financed by the cash generated from operating activities and by $46.3 million of net new borrowings. Total debt was $335.7 million at June 30, 1998 compared with $285.1 million at the end of 1997. The $50.6 million increase in debt includes $4.3 million of Trigen-BioPower debt assumed in the acquisition. In February 1998, $14.4 million of Trigen-Nassau bonds, with a fixed tax-exempt rate of 7.75%, were refinanced by a new issue of variable rate demand tax-exempt bonds. This refinancing resulted in an extraordinary charge of $.3 million, net of a $.2 million income tax benefit. During the first six months of 1998, stockholders' equity increased $3.5 million to $149.0 million at June 30, 1998. This increase reflects $3.9 million of net earnings, $.4 million of amortization of unearned compensation related to restricted shares and $.1 million from the issuance of common stock, net of stock purchases, offset by $.9 million of dividend payments to shareholders. For the six month period ended June 30, 1998, 47,000 shares of common stock were purchased for the treasury at a cost of $.8 million. Reference is made to Note 6 of the Notes to Consolidated Financial Statements with respect to legal proceedings involving the Company. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. Part II - Other Information Item 1. Legal Proceedings. ------------------ Reference is made to Note 6 of the Notes to Consolidated Financial State- ments with respect to legal proceedings involving the Company, which was reported in the Company's Quarterly Report on Form 10-Q for the quarterly period ending March 31, 1998. Item 4. Submission of Matters to a Vote of Security Holders. The annual meeting of security holders was held in Baltimore, Maryland on May 13, 1998. The security holders voted, as recommended by management, for the election to the Board of Directors of Mr. Richard E. Kessel (10,385,533 votes for and 28,639 votes withheld). Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibit is filed as part of this report: 27* Financial Data Schedule (b) The following reports on Form 8-K were filed during the three months ended June 30, 1998. Item 4. Change in Registrant's Certifying Accountant, Amendment No. 3, April 7, 1998 Item 4. Change in Registrant's Certifying Accountants, May 13, 1998 * Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the under- signed thereunto duly authorized. TRIGEN ENERGY CORPORATION /s/ Daniel J. Samela ------------------------------ Daniel J. Samela Controller /s/ Steven T. Ward ------------------------------ Steven T. Ward Treasurer Date: August 13, 1998 EX-27 2
5 This schedule contains summary financial information extracted from SEC Form 10-Q for quarter ending June 30, 1998 and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1998 JUN-30-1998 12,431 0 36,607 1,371 6,641 63,209 517,633 86,123 587,748 58,936 320,173 0 0 124 148,898 587,748 125,706 125,706 88,584 109,802 1,575 0 6,968 7,361 3,165 4,196 0 (299) 0 3,897 .32 .32
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