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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 11,958,714 shares of the Registrant's Common Stock outstanding
as of November 14, 1996.
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TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Quarter Ended September 30, 1996
Part I - Financial Information:
Page
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30,
1996 and 1995 (Unaudited) 2
Condensed Consolidated Balance Sheets as of September 30,
1996 (Unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 (Unaudited) 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-9
Part II - Other Information:
Item 6.Exhibits and Reports on Form 8-K 9
Signature 10
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<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1996 and 1995
Unaudited
(All amounts in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues
Energy revenues $39,174 $29,801 $168,207 $127,675
Fees earned and
other 2,472 1,197 8,343 4,274
_______ _______ _______ _______
Total revenues 41,646 30,998 176,550 131,949
Operating expenses
Fuel and
consumables 15,045 9,064 83,265 53,112
Production and
operating costs 9,882 6,985 31,758 27,575
Depreciation (3,483) 2,478 3,867 9,127
General and
administrative 7,440 4,964 23,433 16,651
_______ _______ _______ _______
Total operating
expenses 28,884 23,491 142,323 106,465
Operating income 12,762 7,507 34,227 25,484
Other income (expense):
Interest expense (4,715) (4,847) (14,180) (14,749)
Other income, net 377 206 1,212 1,220
_______ _______ _______ _______
Income before minority
interests, income
tax expense and
extraordinary loss 8,424 2,866 21,259 11,955
Minority interests in
earnings of consolidated
entities (588) (165) (2,089) (201)
_______ _______ _______ _______
Income before income tax
expense and extraordinary
loss 7,836 2,701 19,170 11,754
Income tax expense 3,079 1,107 7,734 4,762
_______ _______ _______ _______
Income before
extraordinary loss 4,757 1,594 11,436 6,992
Extraordinary loss on
extinguishment of long-term
debt, net of income taxes 1,943 --- 1,943 ---
_______ _______ _______ _______
Net income $2,814 $1,594 $9,493 $6,992
======= ======= ======= =======
Net income per share:
Income before extraordinary
loss $ .41 $ .14 $1.00 $ .61
----- ----- ----- -----
Extraordinary loss (.17) -- (.17) --
_____ _____ _____ _____
Net income per share $.24 $.14 $.83 $.61
===== ===== ===== =====
Average shares
outstanding 11,509,768 11,393,280 11,495,475 11,384,600
========== ========== ========== ==========
Dividends per share $.035 $.035 $.105 $.105
===== ===== ===== =====
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
September 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,602 $ 9,984
Accounts receivable:
Trade (less allowance for
doubtful accounts of $993
in 1996 and $697 in 1995) 18,641 36,275
Other 9,440 1,922
Inventories 6,603 6,239
Prepaid costs and other 8,539 6,890
______ _______
Total current assets 56,825 61,310
Non-current cash and cash equivalents 13,042 10,191
Property, plant and equipment, net 363,128 341,188
Investment in non-consolidated
partnerships 8,706 6,548
Intangible assets, net 15,037 15,088
Deferred costs and other assets, net 20,180 20,581
________ ________
Total assets $476,918 $454,906
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $4,589 $ 5,924
Accrued fuel 9,387 16,806
Accrued expenses and other 16,617 16,718
Short-term debt 11,500 14,165
Current portion of long-term debt 11,624 7,415
_______ _______
Total current liabilities 53,717 61,028
Long-term debt 231,659 223,371
Other liabilities 9,128 9,229
Deferred income tax liabilities 27,309 25,222
_______ _______
Total liabilities 321,813 318,850
Minority interests in consolidated
entities 17,009 17,226
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 11,996,573 shares in 1996,
11,416,418 shares in 1995) 120 114
Additional paid-in capital 112,343 100,788
Retained earnings 26,338 18,070
Treasury stock, at cost (34,696
shares in 1996, 7,268 shares
in 1995) (705) (142)
________ ________
Total stockholders' equity 138,096 118,830
Total liabilities and -------- --------
stockholders' equity $476,918 $454,906
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
Unaudited
(All amounts in thousands)
1996 1995
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Net cash provided by operating activities $ 23,103 $ 13,905
_________ _________
Cash flows from investing activities:
Sale of marketable securities ---- 16,361
Acquisition of energy facilities ---- (18,549)
Capital expenditures (32,161) (11,578)
Investment in non-consolidated partnerships, net (1,911) (1,520)
________ ________
Net cash used in investing activities (34,072) (15,286)
________ ________
Cash flows from financing activities:
Short-term debt, net (2,665) (1,000)
Proceeds of long-term borrowings 36,307 12,000
Payments of long-term borrowings (19,559) (3,429)
Dividends (1,225) (1,195)
Issuance of common stock 6,274 467
Repurchase of common stock (563) ----
Sale of interest rate caps 1,003 ----
Distribution to minority interests (2,134) ----
Deferred financing costs ---- (230)
________ ________
Net cash provided by financing activities 17,438 6,613
________ ________
Net increase in cash and cash equivalents 6,469 5,232
Cash and cash equivalents at January 1 20,175 19,837
________ ________
Cash and cash equivalents at September 30 $ 26,644 $ 25,069
======== ========
Cash and cash equivalents at September 30:
Current cash and cash equivalents $ 13,602 $ 13,855
Non-current cash and cash equivalents 13,042 11,214
________ ________
Cash and cash equivalents at September 30 $ 26,644 $ 25,069
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 12,734 $ 12,235
======== ========
Income taxes $ 2,635 $ 3,298
======== ========
Non-cash investing activity:
Acquisition of subsidiary $ 1,037 $ ----
======== ========
Non-cash financing activity:
Issuance of common stock for acquisition
of subsidiary $ 1,037 $ ----
======== ========
Issuance of common stock for extinguishment
of long-term debt $ 4,250 $ ----
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Trigen Energy Corporation (the "Company") develops, owns and operates
community energy systems and cogeneration facilities at 13 locations in the
United States and Canada. The Company believes that it is the leading
commercial owner and operator of community energy systems in North America.
A community energy system consists of a central production plant that
distributes steam, hot water and/or chilled water to customer buildings
through underground distribution pipelines. Steam, hot water and/or chilled
water are sold by the Company to over 1,500 customers, including
colleges and universities, office buildings, hotels, civic and cultural
landmarks, housing complexes, industrial plants and hospitals. Cogenerated
electricity produced by the Company is used by the Company in eight of its
systems and is sold to one steam customer and to local utilities in three
communities.
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 September 30, 1996, and the results of operations for the
three and nine month periods ended September 30,1996 and 1995 and the cash
flows for the nine month periods ended September 30, 1996 and 1995. The
results of operations for the three and nine month periods ended September
30, 1996 and cash flows for the nine month period ended September 30, 1996
are not indicative of those to be expected or the year ending December 31,
1996. These financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended
December 31, 1995 included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
2. Condemnation Award
On July 29, 1996, the Company was granted an additional condemnation
award of $6.8 million ($6.4 million, net of expenses) related to one of its
facilities in Boston, Massachusetts, which was received on October 17, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results Operations
Overview
The Company's operations are primarily the production and distribution
of steam, hot water, electricity and chilled water. Approximately 60% of
total revenue is derived from long-term contracts. The Company's heating and
cooling revenues and consequently its operating profits are subject to
seasonal fluctuation due to heating demand in the winter and cooling demand
in the summer.
For the quarter ended September 30, 1996, the Company reported net
income of $2.8 million or $0.24 per share compared to $1.6 million or $0.14 per
share for the comparable 1995 period. For the nine months ended September 30,
1996, the Company reported net income of $9.5 million or $0.83 per share
compared to $7.0 million or $0.61 per share for the comparable 1995 period.
<PAGE>
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Revenues
Revenues were $41.6 million for the three months ended September 30, 1996,
an increase of $10.6 million, from $31.0 million in the corresponding quarter in
1995, due principally to two acquisitions consummated in September 1995, which
contributed approximately 74% ($7.8 million) of the increase, and the
increased price of fuel.
Operating Expenses
The Company's cost of sales includes fuel and consumables, production and
operating costs and depreciation expense and is affected primarily by its costs
for fuel, chemicals, water and other commodities. Because the Company's rates
typically enable it to pass changes in its fuel and most commodity costs to
the customer, such changes have little impact on operating income. The
Company's cost of sales and its
operating income are affected by its efficiency in converting fuel to steam, hot
water, electricity and chilled water and its ability to minimize costs through
automation and enhanced process control. Cost of sales as a percentage of
revenues decreased from 59.8% of revenues in the third quarter of 1995 to 51.5%
of revenues in the third quarter of 1996, principally due to the reduction in
depreciation expense related to the gain from the condemnation award granted
to the Company, offset by the increased cost of fuel.
Fuel and consumables' costs were $15.0 million, or 36.1% of revenues, in
the third quarter of 1996, compared to $9.1 million, or 29.2% of revenues, in
the same period of 1995, an increase of $5.9 million. This increase is due
to the impact of the two acquisitions ($4.1 million) and the increased price
of fuel.
Production and operating costs are those costs of operating the Company's
facilities other than fuel and consumables, and include labor and supervisory
personnel, repair and maintenance costs and plant operating costs. Production
and operating costs increased to $9.9 million in the 1996 period from $7.0
million in the 1995 period, and as a percentage of revenues increased to
23.7% in the 1996 period compared to 22.5% in the 1995 period. $1.9 million
of this increase is the result of the two acquisitions.
Depreciation expense was negative $3.5 million in the third quarter of
1996 compared to $2.5 million in the third quarter of 1995, a decrease of $6.0
million, due a to a net gain of $6.4 million from a condemnation award
granted to the Company for one of its Boston, Massachusetts facilities,
offset by the impact of the two acquisitions ($0.2 million).
General and administrative expenses represent on-site management and other
overhead costs incurred for existing operations, as well as the Company's
marketing, development and corporate management costs. General and
administrative costs increased to $7.4 million, or 17.9% of revenues, in the
1996 period from $5.0 million, or 16.0% of revenues, in the 1995 period.
This is primarily due to additional development staff and related costs,
legal costs and the impact of the two acquisitions ($0.5 million).
Operating Income
Operating income was $12.8 million, or 30.6% of revenues, in the third
quarter of 1996 compared to $7.5 million, or 24.2% of revenues, in the same
1995 period. This is primarily the result of lower depreciation due to the
condemnation award ($6.4 million), the impact of the two acquisitions ($1.0
million), offset by increased general and administrative expenses.
Interest Expense; Other Income
Interest expense decreased to $4.7 million in the third quarter of 1996
from $4.8 million in the same 1995 period, primarily due to lower average
interest rates.
Income Tax Expense
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 of 41.9% (after the income tax benefit from the extraordinary
loss) is consistent with the rate in the third quarter of 1995.
Extraordinary Loss
The Company prepaid $7.0 million of subordinated debt in the third quarter
of 1996, which resulted in an extraordinary loss of $1.9 million, net of income
taxes of $1.1 million.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Revenues
Revenues were $176.6 million for the nine months ended September 30, 1996,
an increase of $44.7 million, from $131.9 million in the corresponding period in
1995, due principally to two acquisitions consummated in September 1995,
which contributed approximately 58.6% ($26.2 million) of the increase, a
colder winter in 1996 compared to 1995 and the increased price of fuel.
Operating Expenses
Cost of sales as a percentage of revenues decreased from 68.1% of revenues
in 1995 to 67.3% of revenues in 1996 due to the reduction in depreciation
expense related to the gain from the condemnation award granted to the
Company, offset by the increased cost of fuel.
Fuel and consumables' costs were $83.3 million, or 47.2% of revenues, in
1996, compared to $53.1 million, or 40.3% of revenues, in 1995, an increase
of $30.2 million. This increase is due to the impact of the two acquisitions
($13.7 million), and the increased price of fuel.
Production and operating costs increased to $31.8 million in 1996 from
$27.6 million in 1995, and as a percentage of revenues decreased to 18.0% in
1996 compared to 20.9% in 1995. The increase of $5.3 million resulting from the
two acquisitions was offset by cost savings, labor productivity improvements
and an arbitration award.
Depreciation expense was $3.9 million in 1996 compared to $9.1 million in
1995, a decrease of $5.2 million, due to a net gain of $6.4 million from a
condemnation award granted to the Company for one of its Boston, Massachusetts
facilities, offset by the two acquisitions ($0.7 million).
General and administrative costs increased to $23.4 million, or 13.3% of
revenues, in 1996, from $16.7 million, or 12.6 % of revenues, in 1995. This is
primarily due to additional staff and development costs, legal costs and the
impact of the two acquisitions ($1.6 million).
Operating Income
Operating income was $34.2 million, or 19.4% of revenues, in 1996 compared
to $25.5 million, or 19.3% of revenues, in 1995. Increased general and
administrative expenses offset by cost savings, primarily from efficiency and
labor productivity, higher revenues, lower depreciation expense due to the
condemnation award ($6.4 million), and the impact of the two acquisitions
($4.9 million), resulted in improved operating income of $8.7 million.
Interest Expense; Other Income
Interest expense decreased to $14.2 million in 1996 from $14.7 million in
1995, primarily due to lower average interest rates.
Income Tax Expense
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 of 41.3% (after the income tax benefit from the extraordinayr loss)
is consistent with the rate in 1995.
Extraordinary Loss
The Company prepaid $7.0 million of subordinated debt in the third quarter
of 1996, which resulted in an extraordinary loss of $1.9 million, net of
income taxes of $1.1 million.
Liquidity and Capital Resources
Liquidity
The Company had cash and cash equivalents of $26.6 million at September
30, 1996 and $20.2 million at December 31, 1995, an increase of $6.4 million.
The Company had short-term indebtedness outstanding of $11.5 million at
September 30, 1996 compared to $14.2 million at December 31, 1995, a
reduction of $2.7 million. These changes were primarily due to the use of
cash on hand at December 31, 1995 and cash generated from operations during
the year.
Certain of the Company's debt agreements restrict payments by its
subsidiaries, which are the primary obligors, to the Company unless the payments
are for specified purposes or the subsidiary meets certain financial
covenants. Restricted cash and cash equivalents of $16.1 million at
September 30, 1996 included $8.2 million for debt service and reserve funds,
$3.2 million for operations and maintenance reserves, $1.4 million available
for subsidiary operating purposes and $3.3 million for certain construction
projects. Restricted funds may be invested only in certain securities. At
September 30, 1996, the Company had unused lines of credit available consisting
of $9.7 million under a United Thermal Corporation ("UTC") revolving credit
facility and $26.5 million under a corporate revolving credit facility.
On August 23, 1996, the Company declared a dividend of $.035 per share of
common stock to holders of record as of September 30, 1996, payable October
15, 1996.
Cash Flow
During the nine months ended September 30, 1996, cash provided by operating
activities was $23.1 million, compared to $13.9 million for the comparable
period in 1995. Net cash used in investing activities was $34.1 million for the
nine months ended September 30, 1996 primarily due to capital expenditures of
$32.2 million and the initial equity investment of $2.0 million in the Grays
Ferry Cogeneration Facility. Net cash provided by financing activities was
$17.4 million in 1996 principally reflecting debt proceeds of $36.3 million
and the issuance of common stock of $6.3 million, offset by debt repayments
of $22.2 million.
Debt
At September 30, 1996, the Company's long-term debt (including the current
portion) was $243.3 million or 59.4% of total capital, at a weighted average
annual interest rate of approximately 6.72% (based on three month LIBOR of
5.63% per year) and an average remaining maturity of 6.6 years.
On September 30, 1996, the Company prepaid $7.0 million of subordinated
debt. The prepayment was accomplished through the payment of cash and the
issuance of 200,000 shares of the Company's stock to the lender. In repaying
this debt, costs of $3.0 million ($1.9 million net of an income tax benefit),
were incurred by the Company and were accounted for as an extraordinary loss.
The Company also issued 240,000 shares of stock to its parent, Elyo, S.A.
Certain of the Company's debt is variable rate or rate capped. Based upon
the debt balances at September 30, 1996, a change in the LIBOR rate of .25%
would have a corresponding change in interest expense of approximately
$300,000 per year when three month LIBOR is under 6.25% ranging to
approximately $100,000 per year when three month LIBOR is over 7.25%.
Future Capital Expenditures
The Company's planned capital expenditures for upgrades, expansions,
environmental matters and other improvements are material. The Company believes
that cash provided by operations, net of debt service, cash balances at
September 30, 1996 and available credit facilities will be sufficient to
finance its capital program and several new development projects.
On March 11, 1996, a wholly-owned subsidiary of the Company became a one-
third partner in the Grays Ferry Cogeneration Facility. Under the terms of
the Partnership Agreement, in addition to its initial equity investment, the
Company is required to contribute $10 million when construction is completed,
which is expected in the last quarter of 1997.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
11 - Computation of Earnings Per Share
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended
September 30, 1996.
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SIGNATURES
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
Chief Financial Officer
/s/ Daniel J. Samela
Daniel J. Samela
Controller
Date: November 14, 1996
<TABLE>
<CAPTION>
EXHIBIT 11
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
(All amounts in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Earnings Per
Share - Primary
Net income $2,814 $1,594 $9,493 $6,992
====== ====== ====== ======
Weighted average
number of common
and common
equivalent shares
applicable to
primary earnings
per share
calculation 11,509,768 11,393,280 11,495,475 11,384,600
Dilutive effect
of stock options 60,460 102,976 60,967 88,519
__________ __________ __________ __________
Weighted average
number of shares
outstanding 11,570,228 11,496,256 11,556,442 11,473,119
========== ========== ========== ==========
Net income per
share - primary $ 0.24 $ 0.14 $0.82 $ 0.61
========== ========== ========== ==========
Earnings Per
Share - Assuming
Full Dilution
Net income $2,814 $ 1,594 $ 9,493 $ 6,992
Plus: Interest on
convertible
subordinated debt
(net of taxes) ---- 109 ---- 326
_________ ________ _________ _________
Net income for
fully diluted
earnings per share
calculation $ 2,814 $ 1,703 $ 9,493 $ 7,318
Weighted average
number of common
and common equivalent
shares applicable
to fully diluted
earnings per share
calculation
Weighted average
number of shares
outstanding 11,509,768 11,393,280 11,495,475 11,384,600
Shares issuable
upon conversion of
subordinated debt --- 225,989 --- 225,989
Dilutive effect of
stock options 98,664 117,821 98,664 117,821
__________ __________ __________ __________
11,608,432 11,737,090 11,594,139 11,728,410
========== ========== ========== ==========
Net income per
share assuming full
dilution $ 0.24 $ 0.15 $ 0.82 $ 0.62
====== ====== ====== ======
</TABLE>
