-----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, DZYraqF1RwLlowS91CCo7M8xj/xjw2uwhXKP0rNE3acRmZhIu6pkdL64dvRyfMet ZykPo4Ls4D7BY+ZrjhxlrA== 0000925655-99-000007.txt : 19990330 0000925655-99-000007.hdr.sgml : 19990330 ACCESSION NUMBER: 0000925655-99-000007 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19990329 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/A SEC ACT: SEC FILE NUMBER: 001-13264 FILM NUMBER: 99576494 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/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q/A [ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 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 12,301,399 shares of the Registrant's Common Stock outstanding as of November 12, 1998. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q Quarter Ended September 30, 1998 Page Explanatory Note..............................................................3 Part I - Financial Information: Item 1. Financial Statements Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1998 and 1997 (Unaudited)................4 Consolidated Balance Sheets as of September 30, 1998 (Unaudited) and December 31, 1997...............................................5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 and 1997 (Unaudited).......................6 Notes to Consolidated Financial Statements (Unaudited)...................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................11 Item 3.Quantitative and Qualitative Disclosures About Market Risk.......14 Part II - Other Information:.................................................15 Signatures:..................................................................16 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. EXPLANATORY NOTE As of January 1, 1998, the Company has changed its accounting policy for interim reporting for certain operating costs from an average costing method to an actual costing method. This amended report consisting of revised Items 1 and 2 of Part I of the quarterly report on Form 10-Q reflects the effects of that change in accounting policy. Information not affected by that change in accounting policy is repeated herein without amendment. Information contained in this amendment should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The Company believes that the use of an actual costing methodology better reflects the results of its operations and conforms internal and external reporting of such results. This change affects interim quarterly reporting only and has no effect on an annual basis for the years ended December 31, 1998 and 1997 or any prior years.
Part I - Financial Information Item 1. Financial Statements TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 1998 and 1997 (Unaudited) (In thousands, except per share data) Three Months Nine Months ---------------- ---------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues Thermal energy $35,300 $28,753 $132,578 $129,206 Electric energy 11,001 10,247 31,210 35,809 Equity in earnings/(losses) of non-consolidated partnerships 1,598 (456) 3,624 (1,150) Fees earned and other revenues 2,940 4,480 9,133 10,787 ------- ------- -------- -------- Total revenues 50,839 43,024 176,545 174,652 ------- ------- -------- -------- Operating expenses Fuel and consumables 19,823 19,519 70,062 83,370 Production and operating costs 13,510 11,580 40,018 35,591 Depreciation 4,994 4,067 14,657 11,937 General and administrative 9,311 8,363 30,529 25,400 ------- ------- -------- -------- Total operating expenses 47,638 43,529 155,266 156,298 ------- ------- -------- -------- Operating income (loss) 3,201 (505) 21,279 18,354 Other income (expense) Interest expense (6,046) (4,798) (17,613) (13,924) Other income, net 332 184 4,931 1,049 ------- ------- -------- -------- Earnings (losses) before minority interests, income taxes and extraordinary item (2,513) (5,119) 8,597 5,479 Minority interests in earnings of subsidiaries 799 1,316 2,374 2,845 ------- ------- -------- -------- Earnings (losses) before income taxes and extraordinary item (3,312) (6,435) 6,223 2,634 Income taxes (1,424) (2,639) 2,676 1,079 ------- ------- -------- -------- Earnings (losses) before extraordinary item (1,888) (3,796) 3,547 1,555 Extraordinary loss from extinguishment of debt, net of tax benefit -- -- (299) -- ------- ------- -------- -------- Net earnings (losses) $(1,888) $(3,796) $ 3,248 $ 1,555 ------- ------- -------- -------- Basic earnings (losses) per common share Before extraordinary item $ (.15) $ (.32) $ .30 $ .13 Extraordinary loss -- -- (.03) -- ------- ------- -------- -------- Net earnings (losses) $ (.15) $ (.32) $ .27 $ .13 ------- ------- -------- -------- Diluted earnings (losses) per common share Before extraordinary item $ (.15) $ (.31) $ .30 $ .13 Extraordinary loss -- -- (.03) -- ------- ------- -------- -------- Net earnings (losses) $ (.15) $ (.31) $ .27 $ .13 ------- ------- -------- -------- Average shares outstanding - basic 11,999 12,017 12,010 12,005 ------- ------- -------- -------- Average shares outstanding - diluted 11,999 12,113 12,011 12,135 ------- ------- -------- -------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Unaudited (In thousands, except share data) September 30, December 31, 1998 1997 ------------ ---------- Assets Current assets Cash and cash equivalents $ 13,108 $ 8,967 Accounts receivable Trade (less allowance for doubtful accounts of $1,278 in 1998 and $1,074 in 1997) 24,243 34,866 Other 7,846 10,815 -------- -------- Total accounts receivable 32,089 45,681 Inventories 7,150 7,054 Prepaid expenses and other current assets 8,622 7,985 -------- -------- Total current assets 60,969 69,687 Restricted cash and cash equivalents 4,647 4,726 Property, plant and equipment, net 433,389 388,448 Investment in non-consolidated partnerships 24,065 19,560 Intangible assets, net 50,825 21,454 Deferred costs and other assets, net 23,630 22,094 -------- -------- Total assets $597,525 $525,969 -------- -------- Liabilities and Stockholders' Equity Current liabilities Short-term debt $ 10,350 $ 14,200 Current portion of long-term debt 15,875 14,499 Accounts payable 3,523 10,053 Accrued fuel 9,372 11,545 Accrued expenses and other current liabilities 25,764 21,485 -------- -------- Total current liabilities 64,884 71,782 Long-term debt 337,251 256,361 Other liabilities 5,094 4,786 Deferred income taxes 38,204 31,237 -------- -------- Total liabilities 445,433 364,166 Minority interests in subsidiaries 4,643 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 120,843 114,157 Retained earnings 33,836 31,881 Unearned compensation - restricted stock (5,581) - Cumulative translation adjustment 351 296 Treasury stock, at cost, 139,497 shares in 1998 and 45,500 shares in 1997 (2,124) (973) -------- -------- Total stockholders' equity 147,449 145,482 -------- -------- Total liabilities and stockholders' equity $597,525 $525,969 -------- -------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1998 and 1997 Unaudited (In thousands) 1998 1997 ---- ---- Cash flows from operating activities Net earnings $ 3,248 $ 1,555 Reconciliation of net earnings to cash provided by operating activities Extraordinary item 299 - Depreciation and amortization 18,601 14,681 Deferred income taxes 199 256 Provision for doubtful accounts 339 565 Minority interests in subsidiaries 2,374 2,845 Changes in assets and liabilities Accounts receivable 13,257 12,685 Inventories and other current assets 187 (186) Accounts payable and other current liabilities (6,170) (10,146) Non-current assets and liabilities (3,371) (4,518) ------- ------- Net cash provided by operating activities 28,963 17,737 ------- ------- Cash flows from investing activities Acquisitions (65,350) - Capital expenditures (28,709) (22,609) Purchase of a fuel management agreement and related inventory - (8,871) Proceeds on a sale of property, plant and equipment - 3,000 Investment in non-consolidated partnerships (979) (5,582) ------- ------- Net cash used in investing activities (95,038) (34,062) ------- ------- Cash flows from financing activities Short-term debt, net (3,850) (11,900) Proceeds of long-term debt 110,100 65,387 Payments of long-term debt (32,123) (37,979) Dividends paid (1,293) (1,261) Issuance of common stock, net (608) 1,162 Distribution to minority interests (2,089) (3,544) ------- ------- Net cash provided by financing activities 70,137 11,865 ------- ------- Cash and cash equivalents Increase (decrease) 4,062 (4,460) At beginning of period 13,693 25,276 ------- ------- At end of period $17,755 $20,816 ------- ------- Current $13,108 $16,074 Restricted 4,647 4,742 ------- ------- At end of period $17,755 $20,816 ------- ------- Supplemental disclosure of cash flow information Cash paid during the period for Interest $16,005 $12,556 ------- ------- Income taxes 1,629 2,548 ------- ------- 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 of the Company as of September 30, 1998, and the results of operations for the three and nine months ended September 30, 1998 and 1997 and the cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the three and nine month periods ended September 30, 1998 and cash flows for the nine month period ended September 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. 2. Change in Accounting Policy As of January 1, 1998, the Company has changed its accounting policy for interim reporting for certain operating costs from an average costing method to an actual costing method. The Company believes that use of an actual costing methodology better reflects the results of its operations and conforms internal and external reporting of such results. This change affects interim quarterly reporting only and has no effect on an annual basis for the years ended December 31, 1998 and 1997 or on any prior years. The accompanying financial statements reflect the use of the actual costing method for all periods presented. 3. Recent Accounting Pronouncements 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 the process of evaluating the impact SOP 98-5 will have on the Company's results of operations and financial condition. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Company is currently assessing the impact of adopting FAS 133. 4. Supplementary Income Information Included in other income, net for the nine months ended September 30, 1998, were gains of $2,102,000 from the sale of nitrogen oxide emission allowances and $1,678,000 from an insurance settlement, which were recorded during the second quarter of 1998. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Extraordinary Item The Company incurred an extraordinary charge during the first quarter of $299,000, net of a tax benefit of $161,000, in the nine months ended September 30, 1998, in connection with the early retirement of debt. 6. Acquisitions 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. 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 nine months ended September 30, 1997 and the nine months ended September 30, 1998 as if the acquisition had occurred at the beginning of the years presented (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, ------------ --------------- 1997 1998 1997 ---- ---- ---- Revenues $47,451 $177,682 $188,515 Earnings (losses) before extraordinary item (3,895) 3,617 1,782 Diluted earnings (losses) per common share - before extraordinary item (.32) .30 .15 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 useful 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. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) On September 23, 1998, the Company purchased for $21.3 million an additional 48% interest in the Trigen-Nations Energy Company Limited Partnership from Nations Energy Corporation. This limited partnership owns the energy production assets in service to Coors Brewing Company in Golden Colorado. The excess of purchase price over the net assets purchased was $9.5 million and will be amortized over a period not exceeding 32 years. This purchase increases The Company's investment in Trigen-Nations Energy Company to 99%. 7. Legal Proceeding On April 9, 1998, Grays Ferry Cogeneration Partnership, Trigen-Schuylkill Cogeneration, Inc., Cogen America 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 September 30, 1998, the Company had an investment of $16.2 million in the Partnership, representing a one third interest in the Partnership through its wholly owned subsidiary, Trigen-Schuylkill Cogeneration, Inc. Cogen America 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 September 30, 1998, the Company had a receivable of $2.2 million due from the Partnership. Included in the Company's earnings before income taxes for the three months and nine months ended September 30, 1998 were the Company's share of Partnership earnings of $1.5 million and $4.2 million, respectively, and fees earned from the Partnership of $.7 million and $2.1 million, respectively. This compared to fees earned from the Partnership of $.2 million and $.6 million in the three months and nine months ended September 30, 1997. 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 electric 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 in accordance with the Power Purchase Agreement. The preliminary injunction will 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. On July 7, 1998, PECO withdrew its appeal of the preliminary injunction. 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 $102.6 million 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 charged default interest charges against the Partnership, although the Banks could take these actions in the future. The Partnership recorded default interest of $1.1 million through September 30, 1998. 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. On September 4, 1998, the Banks filed their own complaint against PECO with the Court. Among other things, the Banks are seeking a declaration that PECO's termination of the Power Purchase Agreement was wrongful. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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. 8. 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 nine months ended September 30, 1998 and 1997 (in thousands). Three Months Ended Nine Months Ended September 30, September 30, ------------------ ---------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net earnings (losses) $(1,888) $(3,796) $3,248 $1,555 Other comprehensive income Cumulative translation adjustment 36 - 55 39 ------- ------- ------ ------ Comprehensive income (loss) $(1,852) $(3,796) $3,303 $1,594 ------- ------- ------ ------ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months ended September 30, 1998 compared with Three Months ended September 30, 1997. Overview - -------- For the quarter ended September 30, 1998, the Company reported losses before extraordinary item of $(1.9) million or $(.15) per diluted share. This compared with losses of $(3.8) million and $(.31) of diluted earnings per share in the third quarter of 1997. Revenues were $50.8 million in the third quarter compared with $43 million last year. Operating income was $3.2 million and operating margin was 6.3% in the third quarter of 1998 compared with operating loss of $(.5) million 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 $.7 million in operating income to third 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 $7.8 million from the third quarter of 1997. Thermal energy sales increased $6.5 million reflecting the $4.6 million revenue contribution by Trigen-BioPower. The increase in earnings/(losses) of non-consolidated partnerships reflects the recognition of $1.5 million of earnings from the Grays Ferry Cogeneration partnership. Fees earned and other revenues declined $1.5 million, primarily reflecting the absence of revenues associated with the sale of natural gas pipeline in the third quarter 1997. Operating Expenses Fuel and consumables' costs were $19.8 million in the third quarter compared with $19.5 million last year. As a percent of revenues, fuel and consumables' costs were 39% in the third quarter 1998 compared to 45.3% last year. Production and operating costs increased 16.7% to $13.5 million in the third quarter due mainly to the inclusion of production and operating costs related to Trigen-BioPower. Depreciation expense was $5.0 million compared with $4.1 million in 1997. The increase reflects the higher level of capital expenditures and depreciation expense of Trigen-BioPower. General and administrative expenses increased 11% in the quarter to $9.3 million due primarily to the inclusion of general and administrative expenses for Trigen-BioPower. Interest Expense Interest expense increased $1.2 million to $6.0 million in the third quarter reflecting the increased level of borrowing, primarily due to financing the Trigen-BioPower acquisition. 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 third quarter of 1998 and 1997 was 43.0% and 41.0%, respectively. Nine months ended September 30, 1998 compared with Nine months ended September 30, 1997. Overview - -------- For the nine months ended September 30, 1998, the Company reported earnings before extraordinary item of $3.5 million or $.30 per diluted share. This compared with $1.6 million and $.13 per diluted earnings per share last year. Operating income was $21.3 million on revenues of $176.5 million in the first nine months of 1998 compared with operating income of $18.3 million on revenues of $174.7 million in 1997. Operating margin was 12.1% in 1998 compared with 10.5 % in 1997. Trigen-BioPower contributed $12.9 million in revenues and $2.6 million in operating income to operating results for the nine months ended September 30, 1998. Revenues Revenues of $176.5 million exceeded prior year by $1.9 million. Thermal energy sales increased $3.4 million to $132.6 million, primarily reflecting Trigen-BioPower's $12.9 million contribution to 1998 revenues. This contribution was partially offset by a decline in thermal energy sales at our energy systems in Baltimore, Boston, Philadelphia, and St. Louis due principally to the mild winter weather. 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. Equity in earnings/(losses) of non-consolidated partnerships increased $4.8 million, primarily due to the inclusion of earnings from the Grays Ferry Cogeneration partnership. Fees earned and other revenues declined $1.7 million, primarily reflecting the absence of revenues associated with the sale of a natural gas pipeline in 1997. Operating Expenses Fuel and consumables' costs were $70.1 million in 1998 compared with $83.4 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 12.4% to $40.0 million due mainly to the inclusion of production and operating costs for Trigen-BioPower. Depreciation expense was $14.7 million compared with $11.9 million last year. The increase reflects the higher level of capital expenditures and depreciation expense of Trigen-BioPower. General and administrative expenses increased $5.1 million in the first nine 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 $3.7 million to $17.6 million in 1998 due to the increased level of borrowing, primarily due to financing the Trigen-BioPower acquisition. Other Income, Net The $3.9 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 during 1998. Income Taxes The Company's effective tax rate was 43% for the first nine 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 $17.8 million at September 30, 1998 (which included $4.6 million of restricted cash and cash equivalents), an increase of $4.1 million from year-end 1997. Working capital was a negative $2.6 million compared with a negative $2.1 million at December 31, 1997. At September 30, 1998, receivables were down 30% to $32.1 million while inventories increased slightly to $7.2 million from the balances at the end of 1997. Accounts payable decreased $6.5 million to $3.5 million, and accrued expenses and other current liabilities were up $4.2 million to $24.4 million at September 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 nine months of 1998, the Company generated $29.0 million of cash from operating activities compared with $17.7 million last year. The improvement was primarily due to the cash generated by Trigen-BioPower. During the first nine months of 1998, the Company acquired Trigen-BioPower for $44.1 million, and an additional 48% interest in Trigen-Nations for $21.3 million, invested $28.7 million in capital expenditures and $1.0 million in partnership investments, and paid dividends of $1.3 million to shareholders and $2.1 million to minority interests. These expenditures were financed by the cash generated from operating activities and by $74.1 million of net new borrowings. Total debt was $363.5 million at September 30, 1998, compared with $285.1 million at the end of 1997. The $78.4 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 nine months of 1998, stockholders' equity increased $2.0 million to $147.4 million at September 30, 1998. This increase reflects $3.2 million of net earnings, $.6 million of amortization of unearned compensation related to restricted shares, offset by $1.3 million of dividend payments to shareholders and the purchase of 113,879 shares of common stock for the treasury at a cost of $1.5 million. Reference is made to Note 6 of the Notes to Consolidated Financial Statements with respect to legal proceedings involving the Company. Year 2000 Date Conversion An issue affecting the Company and others is the inability of many computer systems and applications to process the year 2000 ("Y2K") and beyond. To address this problem, the Company has developed a plan that divides direction for Y2K preparedness into four responsibility areas. These areas are Plant Production Compliance, Plant Non-Production Compliance, Desktop Systems and Corporate Systems. Plant Production Compliance includes primary plant systems that produce steam, chilling and hot water, electricity and other forms of energy. A plan to upgrade all non-compliant software and hardware has been underway since 1996. The Company anticipates that all primary plant systems will be compliant by the third quarter of 1999. Plant Non-Production Compliance includes Y2K issues related to telecommunications hardware, climate control systems, security systems, elevators, parking controls, and related systems. Generally, these systems achieve 100% compliance with minor hardware upgrades or chip replacements from original parts manufacturers. Currently, approximately 85% of all plant non production systems are compliant. The Company anticipates that all non production systems will be compliant by March 1999. The Company anticipates all desktop systems to be compliant by September 1999 and Corporate Systems, which includes financial and billing systems, to be compliant by August 1999. The Company is in the process of evaluating the best method of upgrading its systems to achieve compliance. The Company estimates the total external cost to achieve Y2K compliance to be $1 million for the years 1997 through 1999. The Company believes it is staffed sufficiently to address all Y2K issues. The Company purchases raw material from key vendors to produce energy. These vendors include major natural gas, electricity, and water utilities, fuel oil and chemical distributors and coal producers. The Company will continue to survey its key vendors to determine their Y2K compliance. At this time, the Company does not expect any material disruption in services from vendors due to Y2K issues. The Company is, however, dependent in part, upon the ability of its vendors to be Y2K compliant. The Company's Y2K efforts are ongoing and its overall plan, as well as consideration of contingency plans, will continue to evolve as new information becomes available. At this time, the Company does not expect any major interruption of its business activities due to Y2K issues. However, the Company is unable to estimate the ultimate effect Y2K risks will have on its operating results. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Part II - Other Information Item 6. Exhibits (a) The following exhibits are filed as part of this amendment: 18 Letter re change in accounting policy 27 Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. TRIGEN ENERGY CORPORATION /s/ Martin S. Stone ----------------------------------- Martin S. Stone Vice President Finance & Chief Financial Officer /s/ Daniel J. Samela ----------------------------------- Daniel J. Samela Controller Date: March 29, 1999 EX-27 2
5 This schedule contains summary financial information extracted from SEC Form 10-Q/A for quarter ending September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 13,108 0 33,367 1,278 7,150 60,969 524,056 90,667 597,875 64,884 337,251 0 0 124 147,325 597,525 176,545 176,545 124,737 155,266 2,374 0 12,682 6,223 2,676 3,547 0 (299) 0 3,248 .27 .27
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