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 March 31, 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 [ ]
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust II
Financial Statements
March 31, 1999
<PAGE>
Ridgewood Electric Power Trust II
Balance Sheet
- --------------------------------------------------------------------------------
March 31, December 31,
1999 1998
----------- -------------
(unaudited)
Assets:
Investments in power generation projects ...... $ 10,649,584 $ 10,594,402
Notes receivable from sale of investment ...... 2,041,002 2,140,866
Due from affiliates ........................... 8,819 8,819
Other assets .................................. 2,830 3,588
------------ ------------
Total assets ............................. $ 12,702,235 $ 12,747,675
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses ......... $ 138,798 $ 100,897
Borrowings under line of credit agreements .... 450,000 300,000
Due to affiliates ............................. 176,322 214,373
------------ ------------
Total liabilities ........................ 765,120 615,270
------------ ------------
Shareholders' equity:
Shareholders' equity (235.3775 shares
issued and outstanding) ..................... 12,018,985 12,212,324
Managing shareholder's accumulated deficit .... (81,870) (79,919)
------------ ------------
Total shareholders' equity ............... 11,937,115 12,132,405
------------ ------------
Total liabilities and shareholders' equity $ 12,702,235 $ 12,747,675
------------ ------------
See accompanying note to financial statements.
<PAGE>
Ridgewood Electric Power Trust II
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
----------------------
March 31, March 31,
1999 1998
--------- --------
Revenue:
Income from power generation projects ......... $137,247 $236,154
Interest income ............................... 42,855 55,422
-------- --------
Total revenue ............................ 180,102 291,576
-------- --------
Expenses:
Management fee ................................ 55,607 95,721
Accounting and legal fees ..................... 14,203 25,656
Interest expense 6,013 ---
Miscellaneous ................................. 14,262 12,680
-------- --------
Total expenses ........................... 90,085 134,057
-------- --------
Net income ................................ $ 90,017 $157,519
-------- --------
See accompanying note to financial statements.
<PAGE>
Ridgewood Electric Power Trust II
Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholder Total
------------ ----------- ------------
Shareholders' equity, December
31, 1998 ...................... $ 12,212,324 $ (79,919) $ 12,132,405
Cash distributions .............. (282,454) (2,853) (285,307)
Net income for the period ....... 89,115 902 90,017
------------ ------------ ------------
Shareholders' equity, March
31, 1999 .................... $ 12,018,985 $ (81,870) $ 11,937,115
------------ ------------ ------------
See accompanying note to financial statements
<PAGE>
Ridgewood Electric Power Trust II
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
----------------------
March 31, March 31,
1999 1998
--------- ---------
Cash flows from operating activities:
Net income .............................. $ 90,017 $ 157,519
--------- ---------
Adjustments to reconcile net
income to net cash flows from
operating activities:
Investment in power generation projects (55,182) ---
Proceeds from note receivable ......... 99,864 92,007
Changes in assets and liabilities:
Decrease (increase) in other assets .. 758
(65)
Increase (decrease) in accounts
payable and accrued expenses ....... 37,901 (14,331)
Decrease (increase) in due to
affiliates, net .................... (38,051) 31,674)
--------- ---------
Total adjustments ....................... 45,290 109,285
--------- ---------
Net cash provided by operating activities 135,307 266,804
--------- ---------
Cash flows from financing activities:
Cash distributions to shareholders ...... (285,307) (392,568)
Borrowing under line of credit facility . 150,000 --
--------- ---------
Net cash used in financing activities ... (135,307) (392,568)
--------- ---------
Net decrease in cash and cash equivalents .. -- (125,764)
Cash and cash equivalents, beginning of year -- 175,818
--------- ---------
Cash and cash equivalents, end of period ... $ -- $ 50,054
--------- ---------
See accompanying note to financial statements.
<PAGE>
Ridgewood Electric Power Trust II
Note to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 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.
<PAGE>
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
Quarter ended March 31, 1999 compared to quarter ended March 31, 1998
As summarized below, total revenue decreased 38.4% to $180,000 in the first
quarter of 1999 compared to $292,000 in the first quarter of 1998, primarily
because the Berkshire Project ceased distributions to the Trust in the third
quarter of 1998 and because interest income declined.
Project 1999 1998
- ------- ---- ----
Monterey ............................... $137,000 $147,000
Berkshire .............................. -- 88,000
Pump Services .......................... -- 1,000
Interest income ........................ 43,000 56,000
-------- --------
Total .................................. $180,000 $292,000
======== ========
The Monterey project had slightly lower operating results in the first quarter
of 1999 reflecting higher maintenance and repair costs. 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. The lower
Interest income also reflects lower Trust cash balances in 1999.
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.
Total expenses decreased $44,000 (32.8%) to $90,000 in the first quarter of 1999
compared to $134,000 in the same period in 1998, primarily due a decrease in the
management fee. The decline in the management fee reflects both the lower net
assets of the Trust resulting from the write down of the carrying value of the
Berkshire project and a scheduled reduction in annual management fee percentage
from 2.5% to 1.5% of net assets effective February 1, 1999. All other 1999 Trust
expenses were comparable to those of 1998.
Quarter ended March 31, 1998 compared to quarter ended March 31, 1997
As summarized below, total revenue decreased 45.2% to $291,000 in the first
quarter of 1998 compared to $531,000 in the first quarter of 1997, primarily due
the absence of revenues related to the Columbia project and a project
development limited partnership:
Project 1998 1997
- ------- ---- ----
Monterey ................................. $147,000 $136,000
Berkshire ................................ 88,000 96,000
Columbia ................................. -- 165,000
San Diego ................................ -- 50,000
Pump Services ............................ 1,000 2,000
Project development ...................... -- 73,000
Interest income .......................... 56,000 9,000
-------- --------
Total .................................... $292,000 $531,000
======== ========
The Monterey, Berkshire and Pump Services Projects had relatively unchanged
operating results in the first quarter of 1998. The Trust received $50,000 of
distributions from the San Diego project in the first quarter of 1997 prior to
its sale. In the first quarter of 1998, the Trust recorded $50,000 of interest
income from the note that it received from the sale of the San Diego project.
The Columbia Project did not make a cash distribution in the first quarter of
1998 because its profit margin was negatively impacted by increased competition
from other waste management companies operating in the region. In addition, the
Trust received a $73,000 distribution in the first quarter of 1997 from a
project development limited partnership for which the Trust had previously
written off its investment. Interest and dividend income increased to $134,000
in 1997 compared to $1,000 in 1996. Interest income increased because cash was
consolidated at the Trust level in early 1997 and invested in higher yielding
investment accounts.
Total expenses decreased $163,000 (45.1%) to $134,000 in the first quarter of
1998 compared to $297,000 in the same period in 1997, primarily due to the
absence of a $281,000 write-off of certain electric power equipment recorded in
1997. This reduction was partially offset by $96,000 of management fees charged
in the first quarter of 1998 that were not charged in the corresponding period
in 1997. All other 1998 Trust expenses were comparable to 1997.
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 March 31, 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 (discussed
at Legal Proceedings below).
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. Testing of those
changes has been rescheduled to late May 1999 in conjunction with a regularly
scheduled set of distributions. No other material changes in the Trust's
remediation efforts or its plans for year 2000 compliance have occurred.
<PAGE>
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.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
<PAGE>
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
May 17, 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's unaudited interim financial statements for the quarter ended March
31, 1999 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 10,649,584<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,649<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,702,235
<CURRENT-LIABILITIES> 765,120<F3>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 11,937,115<F4>
<TOTAL-LIABILITY-AND-EQUITY> 12,702,235
<SALES> 0
<TOTAL-REVENUES> 180,102
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 90,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 90,017
<INCOME-TAX> 0
<INCOME-CONTINUING> 90,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,017
<EPS-PRIMARY> 382
<EPS-DILUTED> 382
<FN>
<F1>Investments in power project partnerships.
<F2>Includes $8,819 due from affiliates.
<F3>Includes $176,322 due to affiliates.
<F3>Represents Investor Shares of beneficial interest
in Trust with capital accounts of $12,018,985 less
managing shareholder's accumulated deficit of $81,870.
</FN>
</TABLE>
