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, 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 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
(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 12,020,427 shares of the Registrant's Common Stock outstanding
as of August 8, 1997.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Quarter Ended June 30, 1997
Part I - Financial Information: Page
Item 1. Financial Statements
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996 (Unaudited) 2
Consolidated Balance Sheets as of June 30, 1997
(Unaudited) and December 31, 1996 3
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 (Unaudited) 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information 9
Signature 10
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, 1997 and 1996
Unaudited
(In thousands, except per share data)
Three Months Six Months
1997 1996 1997 1996
Revenues
Thermal energy... $34,129 $37,051 $100,453 $106,656
Electric energy. 11,474 9,623 25,562 22,377
Fees earned and other 2,504 2,011 5,613 5,871
------ ------ ------- -------
Total revenues.. 48,107 48,685 131,628 134,904
------ ------ ------- -------
Operating expenses
Fuel and consumables 19,974 20,412 66,477 68,220
Production and 10,891 8,715 25,073 21,876
operating costs
Depreciation 3,526 3,157 8,290 7,350
General and administrative 7,542 7,079 17,037 15,993
------ ------ ------- -------
Total operating expenses 41,933 39,363 116,877 113,439
------ ------ ------- -------
Operating income 6,174 9,322 14,751 21,465
Interest expense, net 4,205 4,380 8,261 8,630
------ ----- ------ ------
Income before minority
interests and income taxes. 1,969 4,942 6,490 12,835
Minority interests in earnings
of subsidiaries 795 700 1,529 1,501
------ ------ ------ ------
Income before income taxes 1,174 4,242 4,961 11,334
Income taxes 481 1,744 2,034 4,655
------ ------ ------ ------
Net income $ 693 $ 2,498 $ 2,927 $ 6,679
------- ------- -------- -------
Net income per share $ .06 $ .22 $ .24 $ .58
------- ------- -------- -------
Average shares outstanding 12,119 11,507 12,108 11,488
------- ------- -------- -------
Dividends per share $ .035 $ .035 $ .07 $ .07
------- ------- -------- -------
See accompanying notes to consolidated financial statements
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1997 1996
(Unaudited)
Assets
Current assets
Cash and cash equivalents $14,053 $14,598
Accounts receivable
Trade (less allowance for doubtful
accounts of $1,215 in 1997 and
$1,128 in 1996) 20,596 35,436
Other 6,071 3,479
------- ------
Total accounts receivable 26,667 38,915
Inventories 6,535 6,900
Other current assets 8,684 7,346
------- -------
Total current assets 55,939 67,759
Non-current cash and cash equivalents 8,832 10,678
Property, plant and equipment, net 379,980 374,549
Investment in non-consolidated partnerships 9,290 8,781
Intangible assets 14,059 14,390
Other assets 18,538 18,279
------- -------
Total assets $486,638 $494,436
-------- --------
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ -- $18,500
Current portion of long-term debt 14,187 13,499
Accounts payable 2,282 7,800
Accrued fuel 10,703 14,394
Accrued expenses and other current
liabilities 25,989 19,102
-------- --------
Total current liabilities 53,161 73,295
Long-term debt 234,858 226,487
Other liabilities 7,280 7,755
Deferred income taxes 30,030 29,597
-------- --------
Total liabilities 325,329 337,134
Minority interests in subsidiaries 17,397 16,768
Stockholders' equity
Preferred stock-$.01 par value, authorized
and unissued 15,000,000 shares -- --
Common stock-$.01 par value, authorized
60,000,000 shares, issued 12,053,672
shares in 1997 and 12,010,597 shares
in 1996 121 120
Additional paid-in capital 113,892 112,836
Retained earnings 30,624 28,538
Treasury stock, at cost 34,831 shares
in 1997 and 46,140 shares in 1996 (725) ( 960)
-------- --------
Total stockholders' equity 143,912 140,534
Total liabilities and stockholders' -------- --------
equity $486,638 $494,436
-------- --------
See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
Unaudited
(In thousands)
1997 1996
Cash flows from operating activities
Net income $ 2,927 $ 6,679
Reconciliation of net income to
cash provided by operating activities
Depreciation and amortization 10,038 8,587
Deferred income taxes 433 2,892
Provision for doubtful accounts 317 206
Minority interests in subsidiaries 1,529 1,501
Changes in assets and liabilities
Accounts receivable 11,931 12,944
Inventories and other current assets (973) (806)
Accounts payable and other (2,322) (5,341)
current liabilities
Noncurrent assets and liabilities (1,334) (751)
--------- -------
Net cash provided by operating activities 22,546 25,911
--------- -------
Cash flows from investing activities
Capital expenditures (13,947) (12,073)
Investment in non-consolidated partnerships (1,100) (2,075)
-------- --------
Net cash used in investing activities (15,047) (14,148)
-------- --------
Cash flows from financing activities
Decrease in short-term debt (18,500) (14,165)
Proceeds of long-term debt 43,978 8,000
Payments of long-term debt (34,919) (7,401)
Dividends paid (841) (808)
Issuance of common stock, net 1,292 415
Proceeds from sale of interest rate caps -- 1,003
Distribution to minority interests (900) (1,534)
------- -------
Net cash used in financing activities (9,890) (14,490)
------- -------
Cash and cash equivalents
Decrease (2,391) (2,727)
At beginning of period 25,276 20,175
------- -------
At end of period $22,885 $17,448
------- -------
Current $14,053 $ 6,635
Non-current 8,832 10,813
------- -------
At end of period $22,885 $17,448
------- -------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 8,320 $ 9,577
------- --------
Income taxes 2,264 1,472
------- --------
Non-cash investing activity
Acquisition of subsidiary -- 1,037
------- -------
Non-cash financing activity
Issuance of common stock for
acquisition of subsidiary -- 1,037
------- -------
See accompanying notes to consolidated financial statements.
[CAPTION]
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 district energy cogeneration systems. Trigen uses its expertise in
thermal engineering and proprietary cogeneration processes to convert fuel to
various forms of thermal energy and electricity at more efficient conversion
rates than conventional processes. Trigen combines heat and power generation,
producing electricity as a by-product, for use in its facilities and for sale to
customers. The Company serves more than 1,500 customers with energy produced at
24 plants in 14 locations, including industrial plants, electric utilities,
commercial and office buildings, government buildings, colleges and
universities, hospitals, residential complexes and hotels.
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, 1997, and the results of operations for the three and six months ended
June 30, 1997 and 1996 and the cash flows for the six months ended June 30, 1997
and 1996. The results of operations for the three and six month periods ended
June 30, 1997 and 1996 and cash flows for the six month period ended June 30,
1997 are not indicative of those to be expected for the year ending December 31,
1997. These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1996 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 presentation.
2. Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions. Revenues and operating income are subject to seasonal fluctuation
due to peak heating demand in the winter and peak cooling demand in the summer.
Due to the seasonality of the Company's business, cost of energy sold for
interim periods within a calendar year is based on average costs to produce and
deliver energy. Effective January 1, 1997, the Company changed its estimate of
the average costs to produce and deliver energy. Although, the impact of this
change on second quarter net income was not significant, the change increased
net income for the six months ended June 30, 1997 by $.6 million or $.05 per
share. The Company expects the change to negatively impact the third quarter
operating results and to positively impact the fourth quarter results.
3. Subsequent Event
On May 2, 1997, following a jury trial in a suit by Kinetic Energy
Development Corporation against the Company in the Circuit Court of Jackson
County, Missouri, in connection with the Company's acquisition of the Kansas
City steam system, a judgment was entered against the Company in the amount of
$4,271,000. On August 6, 1997, the Court set aside the jury verdict and granted
judgment for the Company. In the event this new judgment in favor of the
Company is vacated or reversed on appeal, a new trial is ordered. The Company
believes that this judgment in its favor should be sustained upon any appeal.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months ended June 30, 1997 compared with Three Months ended June 30, 1996
Overview
For the quarter ended June 30, 1997, the Company reported net income of $.7
million, or $.06 per common share. Second quarter earnings in 1996 were $2.5
million, equal to $.22 per common share. Revenues were $48.1 million in the
second quarter compared with $48.7 million last year. Operating income for the
second quarter was $6.2 million compared with $9.3 million a year ago. The mild
spring weather compared to last year and non-operational cost factors
contributed to the earnings shortfall. Non-operating cost factors reduced
second quarter earnings by $.08 per common share. 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.
Effective January 1, 1997, the Company changed its estimate of the average
cost to produce and deliver energy. See Note 2 of the Notes to Consolidated
Financial Statements.
Revenues
Revenues of $48.1 million were down $.6 million as a result of the mild
spring weather. Thermal energy sales declined $2.9 million, or 8%, to $34.1
million, while electric energy sales of $11.5 million were higher by $1.9
million or 19%. Units of energy sold were down approximately 11% in the second
quarter. Energy systems in Baltimore and Philadelphia were particularly
affected by the mild weather. Offsetting the revenue decline in part were
higher fuel prices, which are largely passed through to customers. Fees earned
and other revenue increased 25% in the second quarter reflecting the expansion
of the Ewing Power Systems operation, which was acquired in the first quarter of
1996. Offsetting in part this increase were costs incurred for establishing and
marketing new joint ventures.
Operating Expenses
Fuel and consumables' costs were $20.0 million in the second quarter
compared with $20.4 million in the like quarter last year. This decrease
reflected the lower level of revenues, offset in part by higher fuel costs. As
a percent of revenues, fuel and consumables' costs were 41.5% in the second
quarter compared with 41.9% last year.
Production and operating costs increased 25% to $10.9 million in the second
quarter from $8.7 million last year; and as a percent of revenues increased to
22.6% from 17.9% in 1996. This increase was due to expansion of Ewing Power
Systems and a pipeline rupture in St. Louis. In addition, production and
operating costs for 1996 included an arbitration award of $1.0 million, net of
expenses.
Depreciation expense was $3.5 million compared with $3.2 million last year.
The increase reflects the high level of capital expenditures in the second half
of 1996.
General and administrative expenses increased 7% in the second quarter to
$7.5 million due mainly to higher legal fees. As a percent of revenues, general
and administrative expenses increased to 15.7% from 14.5% last year.
Interest Expense, Net
Net interest expense declined 4% to $4.2 million due primarily to repayment
of high interest rate debt.
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 was 41.0% in the second quarter of 1997 and 41.1% in the second quarter
of 1996.
Six Months ended June 30,1997 compared with Six Months ended June 30, 1996
Overview
For the six months ended June 30,1997, the company reported net income of
$2.9 million, or $.24 per common share. This compared to net income of $6.7
million and $.58 per common share last year. Operating income was $14.8 million
on revenues of $131.6 million in the first six months of 1997 compared with
operating income of $21.5 million on revenues of $134.9 million in 1996.
Revenues
Revenues of $131.6 million were down $3.3 million, or 2%, due to the mild
weather this year. Thermal energy sales were down $6.2 million to $100.5
million, while electric energy sales increased $3.2 million to $25.6 million.
Units of energy sold were down approximately 10% in the first six months of
1997. Energy systems in Baltimore, Boston and Philadelphia were particularly
affected by the milder weather. Offsetting the revenue decline in part were
higher fuel prices, which are largely passed through to customers. The decline
in fees earned and other revenue was due to costs incurred for establishing and
marketing new joint ventures and to the inclusion last year of income resulting
from completion of financing for the Grays Ferry Cogeneration Project. This
decline was partially offset by expansion of Ewing Power systems.
Operating Expenses
Fuel and consumables' costs were $66.5 million in 1997 compared with $68.2
million last year. This decrease reflected the lower level of revenues, offset
in part by higher fuel costs. As a percent of revenues, fuel and consumables'
costs were 50.5% in 1997 and 50.6% in 1996.
Production and operating costs increased 15% to $25.1 million compared with
$21.9 million last year; and as a percent of revenues increased to 19.1% from
16.2% in 1996. The higher costs resulted from expansion of Ewing Power Systems
and a pipeline rupture in St. Louis. In addition, production and operating
costs for 1996 included an arbitration award of $1.0 million, net of expenses.
Depreciation expense was $8.3 million compared with $7.4 million last year.
The increase reflects the high level of capital expenditures in the second half
of 1996.
General and administrative expenses increased $1.0 million, or 7%, to $17.0
million due mainly to higher legal fees. As a percent of revenues, general and
administrative expenses were 12.9% in 1997 and 11.9% in 1996.
Interest Expense, Net
Net interest expense declined 4% to $8.3 million due primarily to repayment
of high interest rate debt.
Income Taxes
The Company's effective tax rate was 41.0% for the first six months of 1997
compared with 41.1% last year.
Liquidity and Financial Position
Cash and cash equivalents were $22.9 million at June 30, 1997, a decrease
of $2.4 million. Working capital was $2.8 million compared with a negative $5.5
million at December 31, 1996. At June 30, 1997, receivables were down 31% to
$26.7 million and inventories decreased 5% to $6.5 million from the balances at
the end of 1996. Accounts payable of $2.3 million and accrued fuel of $10.7
million were down 71% and 26%, respectively. The lower levels of receivables,
inventories and payables at June 30, 1997 reflect the seasonality of the
Company's business. Working capital requirements vary in line with the peak
heating demand in the winter and peak cooling demand in the summer.
The Company's primary source of funds for its business activities and
repaying its debt has been from operations. Cash generated from operating
activities was $22.5 million for the first six months of 1997 compared with
$25.9 million last year. The lower cash from operations in 1997 was due
primarily to the earnings decline. The $22.5 million of cash generated during
the first six months of 1997 along with available cash at the beginning of the
year were used to invest $13.9 million in capital expenditures and $1.1 million
in a partnership investment, repay $9.4 million of debt, and pay $.8 million in
dividends to shareholders and $.9 million to minority interests.
At June 30, 1997, total debt was $249.0 million compared with $258.5
million at year end 1996. On April 4, 1997, the Company entered into a $160
million revolving credit agreement with several banks. This facility is for an
initial period of three years and may be extended by a total of two one-year
periods. Borrowings under the facility bear interest, at the Company's option,
at an annual rate equal to the base rate or the Eurodollar rate plus 3/4%. The
base rate is the higher of the prime lending rate or the Federal Reserve
reported Federal funds rate plus 1/2%. As of June 10, 1997, the Company amended
the $160 million revolving credit agreement by reducing the facility to $125
million and entering into a $35 million revolving credit facility with the same
group of banks. The new facility is for an initial 364-day period and may be
extended by another 364-day period. The terms and conditions of both facilities
are the same.
During the first six months of 1997, stockholders' equity increased $3.4
million to $143.9 million at June 30, 1997. This increase reflects $2.9 million
of net income, $1.1 million from the issuance of common stock and $.2 million of
proceeds from the exercise of stock options; offset by $.8 million dividend
payment to shareholders.
The Company's planned capital expenditures for upgrades, expansions,
environmental matters and other improvements are material. The Company believes
that cash provided by operations, cash on hand and available credit facilities
will be sufficient to finance its capital program and several new development
projects.
On May 2, 1997, following a jury trial in a suit by Kinetic Energy
Development Corporation against the Company in the Circuit Court of Jackson
County, Missouri, in connection with the Company's acquisition of the Kansas
City steam system, a judgment was entered against the Company in the amount of
$4,271,000. On August 6, 1997, the Court set aside the jury verdict and granted
judgment for the Company. In the event this new judgment in favor of the
Company is vacated or reversed on appeal, a new trial is ordered. The Company
believes that this judgment in its favor should be sustained upon any appeal.
Impact of New Accounting Standard
Statement of Financial Accounting Standard No. 128, "Earnings per Share"
(SFAS No. 128), will require presentation of "basic" and "diluted" earnings per
share for periods ending after December 15, 1997. Based on preliminary
analysis, the Company does not expect the adoption of SFAS No. 128 to
significantly impact earnings per share for periods previously presented.
Part II - Other Information
Item 1. Legal Proceedings
On May 2, 1997, following a jury trial in a suit by Kinetic Energy
Development Corporation against the Company in the Circuit Court of Jackson
County, Missouri, in connection with the Company's acquisition of the
Kansas City steam system, a judgment was entered against the Company in the
amount of $4,271,000. On August 6, 1997, the Court set aside the jury
verdict and granted judgment for the Company. In the event this new
judgment in favor of the Company is vacated or reversed on appeal, a new
trial is ordered. The Company believes that this judgment in its favor
should be sustained upon any appeal.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of security holders was held in Cincinnati, Ohio on
May 14, 1997. The security holders voted, as recommended by management for
the election to the Board of Directors of Messrs. Charles E. Bayless
(10,960,491 votes for and 24,491 votes against), Michel Cassou (10,960,527
votes for and 24,455 votes against), Michel Bleitrach (10,960,527 votes for
and 24,455 votes against) and Dominique Mangin d`Ouince (10,960,527 votes
for and 24,455 votes against), for ratification of the selection of KPMG
Peat Marwick LLP as the Company's independent certified public accountants
(10,983,768 votes for , 513 votes against and 701 abstained) and for
amendment of the Company's 1994 Stock Incentive Plan to increase the number
of shares of common stock available for award thereunder from 1,050,000 to
2,000,000 (9,157,423 votes for, 1,129,845 votes against and 31,430
abstained).
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
4.5 Revolving Credit Facility, Dated as of April 4, 1997 between
the Company, Banks Listed on the Signature Page and
Societe General as Issuing Bank and Agent.
4.51 Amendment No.1, Dated as of June 10, 1997, to the Revolving
Credit Facility Dated as of April 4, 1997.
4.52 Revolving Credit Facility, Dated as of June 10, 1997
between the Company, Banks Listed on the Signature Page and
Societe Generle as Issuing Bank and Agent.
27 Financial Data Schedule.
(b)No reports on Form 8-K were filed for the three months ended June 30,
1997.
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 thereunto duly authorized.
TRIGEN ENERGY CORPORATION
/s/ David H. Kelly
David H. Kelly
Vice President, Finance and
Chief Financial Officer
/s/ Daniel J. Samela
Daniel J. Samela
Controller
Date: August 13, 1997