UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
Commission File Number 0-21304
RIDGEWOOD ELECTRIC POWER TRUST II
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 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)
Registrant's telephone number, including area code:
(201) 447-9000
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 [ ]
<PAGE>
PART I. - FINANCIAL INFORMATION
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST II
BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Assets
Investments in power
generation projects $12,609,307 $12,609,307
Cash and cash equivalents --- 175,818
Notes receivable from sale
of investment 2,334,722 2,521,001
Due from affiliates 103,773 144,113
Other assets 2,895 2,436
Total assets $15,050,697 $15,452,675
Liabilities and Share-
holders' Equity
Accounts payable and
accrued expenses $ 36,778 $ 32,186
Due to affiliates 138,528 156,735
Total liabilities $ 175,306 $ 188,921
Shareholders' equity:
Shareholders' equity
(235.3775 shares issued
and outstanding) 14,927,878 15,312,360
Managing shareholder's
accumulated deficit (52,487) (48,606)
Total shareholders'
equity 14,875,391 15,263,754
Total liabilities and
shareholders' equity $15,050,697 $15,452,675
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST II
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND QUARTERS
ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
<CAPTION>
Six Months Ended Quarter Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue:
Income from power
generation projects $ 535,122 $ 983,500 $ 298,968 $ 454,231
Gain on sale of RSD
Power Partners, --- 2,594,316 --- 2,594,316
Interest income 103,792 6,700 48,370 4,704
Total revenues 638,914 3,584,516 347,338 3,053,251
Expenses:
Project due diligence costs --- 5,046 --- 2,375
Management fee 191,442 170,363 95,721 170,363
Writedown of electric power
equipment --- 281,018 --- ---
Miscellaneous 51,238 29,925 12,902 16,623
242,680 486,352 108,623 189,361
Net income $ 396,234 $ 3,098,164 $ 238,715 $2,863,890
<FN> See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST II
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 30, 1998
(unaudited)
<CAPTION>
Managing
Shareholders Shareholder Total
<S> <C> <C> <C>
Shareholders' equity
December 31, 1997 $15,312,360 $ (48,606) $15,263,754
Cash distributions (776,751) (7,846) (784,597)
Net income for the period 392,269 3,965 396,234
Shareholder's equity
June 30, 1998 $14,927,878 $ (52,487) $14,875,391
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST II
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
[CAPTION]
Six months Six months
ended June 30, ended June 30,
1998 1997
[S] [C] [C]
Cash flows from operating
activities:
Net income (loss) $ 396,234 $ 3,098,164
Adjustments to
reconcile net income
to net cash flows from
operating activities:
Gain on sale of RSD Power
Partners --- (2,594,316)
Sale of investment in
RSD Power Partners --- 3,401,591
Writedown of electric
power equipment --- 276,893
Proceeds from note receivable 186,279 ---
Changes in assets &
liabilities:
Increase in other assets (459) (4,384)
Increase (decrease)in
accounts payable and
accrued expenses 4,592 (20,458)
Increase in due to
affiliates, net 22,133 3,831
Total adjustments 212,545 1,063,157
Net cash provided
by operating activities 608,779 4,161,321
Cash flows from
financing activities:
Cash distributions to
Shareholders (784,597) (972,229)
Net cash used in
financing activities (784,597) (972,229)
Net (decrease)increase in
cash and cash equivalents (175,818) 3,189,092
Cash and cash equivalents
beginning of period 175,818 ---
Cash and cash equivalents
end of period $ --- $ 3,189,092
[FN]
See Accompanying Notes to Financial Statements
[/TABLE]
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST II
NOTE TO FINANCIAL STATEMENTS
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 1997 Annual Report on Form 10-K, which should be
read in conjunction with these financial statements.
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
This Quarterly Report on Form 10-Q, like some other statements made by the
Trust from time to time, has forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future
results and the business climate. In order to make these statements, the
Trust has had to make assumptions as to the future. It has also had to
make estimates in some cases about events that have already happened, and
to rely on data that may be found to be inaccurate at a later time.
Because these forward-looking statements are based on assumptions,
estimates and changeable data, and because any attempt to predict the
future is subject to other errors, what happens to the Trust in the future
may be materially different from the Trust's forward-looking statements
here.
The Trust therefore warns readers of this document that they should not
rely on these forward-looking statements without considering all of the
things that could make them inaccurate. The Trust's other filings with the
Securities and Exchange Commission discuss many (but not all) of the risks
and uncertainties that might affect these forward-looking statements.
Some of these are changes in political and economic conditions, federal or
state regulatory structures, government taxation, spending and budgetary
policies, government mandates, demand for electricity and thermal energy,
the ability of customers to pay for energy received, supplies of fuel and
prices of fuels, operational status of plant, mechanical breakdowns,
availability of labor and the willingness of electric utilities to perform
existing power purchase agreements in good faith.
By making these statements now, the Trust is not making any commitment to
revise these forward-looking statements to reflect events that happen after
the date of this document or to reflect unanticipated future events.
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.
The Berkshire Project receives revenue in the form of
tipping fees for waste delivered to the facility and from
steam sold under a long-term contract which expires in
2004. Tipping fees are based on spot market prices which
may fluctuate from time to time. The Project's steam
customer may or may not extend its purchases beyond the
year 2004.
The Columbia Project receives revenue in the form of
tipping fees for waste delivered to the facility by local
waste haulers and transferred to long haul trucks for
delivery to distant landfills. The Project's profit
margins have been reduced due to competition from national
waste management companies operating in the same region.
Results of Operations
<TABLE>
<CAPTION>
Revenues Six Months Ended June 30, Quarter Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Monterey $ 252,000 $ 408,000 $ 105,000 $ 271,000
Berkshire 176,000 184,000 88,000 88,000
Columbia 100,000 217,000 100,000 52,000
San Diego --- 2,644,000 --- 2,594,000
Sunkist 7,000 52,000 6,000 43,000
Project development --- 73,000 --- ---
Interest income 104,000 7,000 48,000 5,000
Total $ 639,000 $ 3,585,000 $ 347,000 $3,053,000
</TABLE>
Total revenues decreased $2,946,000 (82%) to $639,000 for
the first six months of 1998 from $3,585,000 in the first
six months of 1997 primarily because of the $2,594,000 gain
on the sale of the San Diego project recorded in 1997.
Distributions from the Monterey, Columbia and Sunkist
Projects also declined by $156,000, $117,000 and $45,000,
respectively. The decline from the Monterey Project was
attributable to increased maintenance costs from a periodic
overhaul of its equipment and reduced revenues because of
the scheduled shutdown. The lower distributions from the
Columbia Project in the six months ended June 30, 1998
resulted from lower profit margins caused by increased
competition from other waste management companies operating
in the region. The Trust expects this pressure to
continue. The Sunkist Project, which provides irrigation
pumping to Southern California farmers, suffered from the
extraordinary rainfall that occurred in the first half of
1998. Although distributions from the Berkshire Project
for the 1998 period were comparable to those of the 1997
period, the Trust is beginning an intensive financial and
engineering review of this Project, the results of which
are not predictable at this time. Finally, the increase in
interest income from the 1997 period to the 1998 period
reflects amounts received in 1998 on the note received as part
of the sale price of the San Diego Project. The changes in
total revenues in the second quarter of 1998 as compared to
the second quarter of 1997 were caused by the same factors.
Expenses
For the six months ended June 30, 1998, total expenses
decreased $243,000 (50%) to $243,000 from $486,000 in the
same period in 1997, reflecting a $281,000 write-off of
certain electric power equipment recorded in the 1997
period. For the quarter ended June 30, 1998, total
expenses decreased $81,000 (42%) to $109,000 from $189,000
in the same period in 1997 because of a timing change. In
1997, both the first and second quarter 1997 management
fees had been recorded in the second quarter of 1997.
Other Trust expenses for the 1998 periods were comparable
to those for the 1997 periods.
Liquidity and Capital Resources
During the first six months of 1998, the Trust's operating
activities generated $609,000 of cash compared to
$4,161,000 of cash during the same period in 1997. The
change is primarily attributable to the $3,402,000 of cash
received on the sale of the San Diego Project in the second
quarter of 1997. Cash distributions to shareholders
decreased to $785,000 in the first six months of 1998 from
$972,000 in the same period in 1997 due to a decrease in
the monthly cash distribution rate in 1998.
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. There have been no
borrowings under the line of credit in 1998 but the Trust
expects to use the line during the third quarter of 1998 to
allow more consistent distributions to Investors at times
when revenues are sporadic.
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's policy is to distribute as much cash as is prudent
to shareholders. Accordingly, the Trust has not found it
necessary to retain a significant amount of working
capital. The need to retain working capital is further
reduced by the availability of the line of credit facility.
<PAGE>
PART II - OTHER INFORMATION
Item #1 Legal Proceedings
On February 28, 1997 Michael Cutbirth, an individual, sued the Managing
Shareholder in the Superior Court of California, Kern County, claiming
unspecified damages (which may include a claim for an equity interest)
for breach of an alleged confidentiality agreement relating to the
acquisition of the Monterey Project. The Managing Shareholder has
successfully removed the lawsuit to the United States District Court for
the Eastern District of California. Trial is set for August 19 and 20, 1998.
The Managing Shareholder believes that it has ample defenses to Mr.
Cutbirth's claims and that it will defend the action vigorously.
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
RIDGEWOOD ELECTRIC POWER TRUST II
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 14, 1998 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Registrant's unaudited interim financial
statements for the six months ended June 30, 1998 and is
qualified in its entirety by reference to those financial
statements.
</LEGEND>
<CIK> 0000895993
<NAME> RIDGEWOOD ELECTRIC POWER TRUST II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 14,944,029<F1>
<RECEIVABLES> 103,773<F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 103,773
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,050,697
<CURRENT-LIABILITIES> 175,306
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 14,875,391<F3>
<TOTAL-LIABILITY-AND-EQUITY> 15,050,697
<SALES> 0
<TOTAL-REVENUES> 638,914
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 242,680
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 396,234
<INCOME-TAX> 0
<INCOME-CONTINUING> 396,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396,234
<EPS-PRIMARY> 1,683
<EPS-DILUTED> 1,683
<FN>
<F1>Investments in power project partnerships and note receivable from
sale of San Diego Project.
<F2>Due from affiliates.
<F3>Represents Investor Shares of beneficial interest in
Trust with capital accounts of $14,927,878 less managing
shareholder's accumulated deficit of $52,487.
</FN>
</TABLE>
