FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1999
Commission file Number 0-21304
RIDGEWOOD ELECTRIC POWER TRUST II
(Exact name of registrant as specified in its charter.)
Delaware 22-3206429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
(Address of principal executive offices) (Zip Code)
(201) 447-9000
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 [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust II
Financial Statements
June 30, 1999
Ridgewood Electric Power Trust II
Balance Sheet
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June 30, December 31,
1999 1998
------------ -----------
(unaudited)
Assets:
Investments in power generation projects . $ 10,621,932 $ 10,594,402
Cash and cash equivalents ................ 24,784 --
Notes receivable from sale of investment . 1,939,126 2,140,866
Due from affiliates ...................... -- 8,819
Other assets ............................. 1,947 3,588
------------ ------------
Total assets ........................ $ 12,587,789 $ 12,747,675
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses .... $ 24,645 $ 100,897
Borrowings under line of credit agreements 450,000 300,000
Due to affiliates ........................ 162,312 214,373
------------ ------------
Total liabilities ................... 636,957 615,270
------------ ------------
Shareholders' equity:
Shareholders' equity (235.3775 shares
issued and outstanding) ................ 12,032,567 12,212,324
Managing shareholder's accumulated deficit (81,735) (79,919)
------------ ------------
Total shareholders' equity .......... 11,950,832 12,132,405
------------ ------------
Total liabilities and shareholders'
equity .............................. $ 12,587,789 $ 12,747,675
------------ ------------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Statement of Operations (unaudited)
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Six Months Ended Three Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
Revenue:
Income from power
generation projects ... $163,818 $535,122 $ 26,571 $298,968
Interest income ......... 84,409 103,792 41,554 48,370
-------- -------- -------- --------
Total revenue ........ 248,227 638,914 68,125 347,338
-------- -------- -------- --------
Expenses:
Accounting and legal fees 26,453 25,250 12,250 --
Management fee .......... 55,607 191,442 -- 95,721
Interest expense ........ 15,389 -- 6,012 --
Miscellaneous ........... 47,046 25,988 36,148 12,902
-------- -------- -------- --------
Total expenses ....... 144,495 242,680 54,410 108,623
-------- -------- -------- --------
Net income ................. $103,732 $396,234 $ 13,715 $238,715
-------- -------- -------- --------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Statement of Changes in Shareholders' Equity (unaudited)
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Managing
Shareholders Shareholder Total
------------ ------------ ------------
Shareholders' equity,
December 31, 1998 ..... $ 12,212,324 $ (79,919) $ 12,132,405
Cash distributions ...... (282,452) (2,853) (285,305)
Net income for the period 102,695 1,037 103,732
------------ ------------ ------------
Shareholders' equity,
June 30, 1999 ......... $ 12,032,567 $ (81,735) $ 11,950,832
------------ ------------ ------------
See accompanying note to financial statements
Ridgewood Electric Power Trust II
Statement of Cash Flows (unaudited)
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Six Months Ended
----------------------
June 30, June 30,
1999 1998
--------- ---------
Cash flows from operating activities:
Net income ................................ $ 103,732 $ 396,234
--------- ---------
Adjustments to reconcile net
income to net cash flows from
operating activities:
(Additional) return of
investment in power
generation projects, net ................ (27,530) 59,003
Proceeds from note receivable ........... 201,740 186,279
Changes in assets and liabilities:
Decrease in due from affiliates ....... 8,819 40,340
Decrease (increase) in other assets ... 1,641 (459)
(Decrease) increase in accounts
payable and accrued expenses ....... (76,252) 4,592
Decrease in due to affiliates ......... (52,061) (77,210)
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Total adjustments ............ 56,357 212,545
--------- ---------
Net cash provided by operating activities 160,089 608,779
--------- ---------
Cash flows from financing activities:
Cash distributions to shareholders ....... (285,305) (784,597)
Borrowing under line of credit facility .. 150,000 --
--------- ---------
Net cash used in financing activities .. (135,305) (784,597)
--------- ---------
Net decrease in cash and cash equivalents .. 24,784 (175,818)
Cash and cash equivalents, beginning of year -- 175,818
--------- ---------
Cash and cash equivalents, end of period ... $ 24,784 $ --
--------- ---------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Note to Financial Statements (unaudited)
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1. General
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, which consist of normal recurring adjustments,
necessary for the fair presentation of the results for the interim periods.
Additional footnote disclosure concerning accounting policies and other manners
are disclosed in Ridgewood Electric Power Trust II's financial statements
included in the 1998 Annual Report on Form 10-K, which should be read in
conjunction with these financial statements. The year-end balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
The results of operations for an interim period should not necessarily be taken
as indicative of the results of operations that may be expected for a twelve
month period.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are generally rounded to the nearest $1,000.
Introduction
The Trust carries its investment in the Projects it owns at fair value and does
not consolidate its financial statements with the financial statements of the
Projects. Revenue is recorded by the Trust as cash distributions are received
from the Projects. Trust revenues may fluctuate from period to period depending
on the operating cash flow generated by the Projects and the amount of cash
retained to fund capital expenditures.
Results of Operations
As summarized below, total revenue decreased 61.2% to $248,000 in the first six
months of 1999 compared to $639,000 in the same period in 1998, primarily
because of lower distributions from the Monterey, Berkshire and Columbia
projects. Revenue also decreased 80.4% to $68,000 in the second quarter of 1999
compared to $347,000 in the same period in 1998.
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
Project 1999 1998 1999 1998
-------- -------- -------- --------
Monterey ...... $137,000 $252,000 $ -- $105,000
Berkshire ..... -- 176,000 -- 88,000
Columbia ...... -- 100,000 -- 100,000
Pump Services . 27,000 7,000 26,000 6,000
Interest income 84,000 104,000 42,000 48,000
-------- -------- -------- --------
Total ......... $248,000 $639,000 $ 68,000 $347,000
======== ======== ======== ========
The Monterey project did not make distributions to the Trust in the second
quarter of 1999 because of costs associated with scheduled major engine
maintenance and legal costs associated with the proceedings with Pacific Gas &
Electric Company (see Legal Proceedings below).
The decline in revenue at Berkshire reflects the stoppage of distributions from
the Project in the third quarter of 1998. Please refer to the Trust's Annual
Report on Form 10-K for 1998 for an explanation of the situation at the Project.
The decline in revenues from Columbia reflects the timing of distributions from
the project. Distributions are expected to increase in the summer and fall when
the facility receives increased throughput from the disposal of construction and
demolition material.
The increase in distributions from the Pump Services investment reflects the
return to a normal level of pumping activity in 1999 from the low level in the
prior year. The low level of 1998 irrigation pumping was a result of the
significant El Nino rainfall in Orange County.
Interest income declined primarily because interest represents a smaller portion
of the constant monthly payment from the note received from the sale of the San
Diego project in 1997.
Total expenses decreased $44,000 (59.6%) to $54,000 in the second quarter of
1999 compared to $109,000 in the same period in 1998, primarily due the absence
of the management fee. Due to the decline in distributions from the Monterey and
Berkshire projects, the managing shareholder waived its management fee beginning
in April, 1999. The decline in total expenses from $243,000 in the first six
months of 1998 to $144,000 in the same period in 1999 also reflects the lower
management fee.
Liquidity and Capital Resources
In 1997, the Trust and Fleet Bank, N.A. (the "Bank") entered into a revolving
line of credit agreement, whereby the Bank provides a three year committed line
of credit facility of $750,000. Outstanding borrowings bear interest at the
Bank's prime rate or, at the Trust's choice, at LIBOR plus 2.5%. The credit
agreement requires the Trust to maintain a ratio of total debt to tangible net
worth of no more than 1 to 1 and a minimum debt service coverage ratio of 2 to
1. The credit facility was obtained in order to allow the Trust to operate using
a minimum amount of cash, maximize the amount invested in Projects and maximize
cash distributions to shareholders. Borrowing under the credit facility
increased from $300,000 at December 31, 1998 to $450,000 at June 30, 1999.
In April 1999, the Managing Shareholder announced that distributions to
shareholders would cease until the Trust had built up sufficient cash reserves
to repay borrowing under the line of credit facility and pay legal costs
associated with the proceeding with Pacific Gas and Electric Company.
Obligations of the Trust are generally limited to payment of the management fee
to the Managing Shareholder, payments for certain accounting and legal services
to third persons and distributions to shareholders of available operating cash
flow generated by the Trust's investments.
The Trust anticipates that its cash flow from operations during 1999 will be
adequate to fund its obligations.
Year 2000 remediation
Please refer to the Trust's disclosures at Item 7 - Management's Discussion and
Analysis of its Annual Report on Form 10-K for 1998 for a discussion of year
2000 issues affecting the Trust. Since that report was filed, the only material
change in the Trust's year 2000 compliance is that the changes to the Managing
Shareholder's investor distribution system have been completed. No material
changes in the Trust's remediation efforts or its plans for year 2000 compliance
have occurred.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in the Trust's Annual Report on Form 10-K for 1998,
Pacific Gas and Electric Company, the purchaser of the electricity generated by
the Trust's Monterey Project, has sued the Trust's subsidiary that owns the
Project in the Superior Court of California for the City and County of San
Francisco. Discovery is underway.
Item 5. Other Information.
Ridgewood Power Corporation has been the managing shareholder of the Trust. It
organized the Trust and acted as managing shareholder until April 1999. On or
about April 20, 1999 it was merged into Ridgewood Power LLC, a New Jersey
limited liability company, which thus became the Managing Shareholder of the
Trust. Ridgewood Power LLC was organized in early April 1999 and has no business
other than acting as the successor to Ridgewood Power Corporation. No material
change in the Trust's operations or business will result from the merger.
Robert E. Swanson has been the President, sole director and sole stockholder of
Ridgewood Power Corporation since its inception in February 1991 and is now the
controlling member, sole manager and President of the Managing Shareholder. Mr.
Swanson currently is the sole equity owner of the Managing Shareholder but is
considering a transfer of 53% of the equity ownership to two family trusts. If
that transfer is made, he will have the power on behalf of those trusts to vote
or dispose of the membership equity interests owned by them and accordingly will
continue to have sole control of the Managing Shareholder. Further, Mr. Swanson
is designated as the sole manager of the Managing Shareholder in its operating
agreement.
Ridgewood Power LLC is also the managing shareholder of the other five business
trusts organized by Ridgewood Power Corporation to participate in the
independent electric power industry.
Similarly, Ridgewood Power Management Corporation, which operates certain
Projects on behalf of the Trust, was merged on or about April 20, 1999 into a
new New Jersey limited liability company, Ridgewood Power Management LLC. The
ownership and control of Ridgewood Power Management LLC are the same as those of
Ridgewood Power LLC and its only business is to be the successor to Ridgewood
Power Management Corporation. No material change in the operation of the
Projects is expected as a result of that merger.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIDGEWOOD ELECTRIC POWER TRUST II
Registrant
August 13, 1999 By /s/ Martin V. Quinn
Date Martin V. Quinn
Senior Vice President and Chief Financial
Officer (signing on behalf of the Registrant
and as principal financial officer)