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 September 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 12,038,222 shares of the Registrant's Common Stock outstanding
as of November 10, 1997.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Quarter Ended September 30, 1997
Part I - Financial Information: Page
Item 1. Financial Statements
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 1997 and 1996 (Unaudited) 2
Consolidated Balance Sheets as of September 30, 1997 (Unaudited) and
December 31, 1996 3
Consolidated Statements of Cash Flows for the Nine Months
Ended September 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
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1997 and 1996
Unaudited
(In thousands, except per share data)
Three Months Nine Months
-------------- -----------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues
Thermal Energy $28,753 $29,091 $129,206 $135,747
Electric energy 10,247 10,083 35,809 32,460
Fees earned and other 4,024 2,472 9,637 8,343
------- ------- -------- -------
Total revenues 43,024 41,646 174,652 176,550
------- ------- -------- -------
Operating expenses
Fuel and consumables 15,022 15,045 81,499 83,265
Production and operating costs 9,767 9,882 34,840 31,758
Depreciation 3,353 (3,483) 11,643 3,867
General and administrative 8,363 7,440 25,400 23,433
------- ------- -------- --------
Total operating expenses 36,505 28,884 153,382 142,323
------- ------- -------- --------
Operating income 6,519 12,762 21,270 34,227
Interest expense, net 4,614 4,338 12,875 12,968
------- ------- -------- --------
Income before minority interests,
income taxes and extraordinary item 1,905 8,424 8,395 21,259
Minority interests in earnings of
subsidiaries 1,316 588 2,845 2,089
------- ------- -------- --------
Income before income taxes &
extraordinary item 589 7,836 5,550 19,170
Income taxes 241 3,079 2,275 7,734
------- ------- -------- --------
Income before extraordinary item 348 4,757 3,275 11,436
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit -- (1,943) -- (1,943)
------- -------- -------- --------
Net income $ 348 $2,814 $ 3,275 $ 9,493
------- -------- -------- --------
Net income per share
Before extraordinary loss $ .03 $ 41 $ .27 $ 1.00
Extraordinary loss -- (.17) -- (.17)
------- -------- --------- --------
Net income $ .03 $ .24 $ .27 $ .83
------- --------- --------- --------
Average shares outstanding 12,113 11,510 12,127 11,495
------- --------- --------- --------
Dividends per share $ .035 $ .035 $ .105 $ .105
------- --------- --------- --------
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
1997 1996
-------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 16,074 $ 14,598
Accounts receivable
Trade (less allowance for doubtful
accounts of $1,238 in 1997 and
$1,128 in 1996) 20,062 35,436
Other 5,603 3,479
-------- --------
Total accounts receivable 25,665 38,915
Inventories 6,591 6,900
Other current assets 8,212 7,346
-------- --------
Total current assets 56,542 67,759
Non-current cash and cash equivalents 4,742 10,678
Property, plant and equipment, net 381,540 374,549
Investment in non-consolidated
partnerships 13,166 8,781
Intangible assets 22,245 14,390
Other assets 22,528 18,279
-------- --------
Total assets $500,763 $494,436
-------- --------
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ 6,600 $18,500
Current portion of long-term debt 18,181 13,499
Accounts payable 4,195 7,800
Accrued fuel 8,714 14,394
Accrued expenses and other current
liabilities 16,006 18,236
------- ---------
Total current liabilities 53,696 72,429
Long-term debt 249,213 226,487
Other liabilities 7,323 7,755
Deferred income taxes 29,853 29,597
-------- --------
Total liabilities 340,085 336,268
Minority interests in subsidiaries 16,069 16,768
Stockholders' equity
Preferred stock-$.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 113,887 112,836
Retained earnings 30,551 28,538
Cumulative translation adjustment 899 866
Treasury stock at cost, 40,985 shares
in 1997 and 46,140 shares in 1996 (849) (960)
-------- --------
Total stockholders' equity 144,609 141,400
-------- --------
Total liabilities and stockholders'
equity $500,763 $494,436
-------- --------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996 Unaudited (In
thousands)
<S> <C> <C>
1997 1996
---- ----
Cash flows from operating activities
Net income $ 3,275 $9,493
Reconciliation of net income to cash
provided by operating activities
Depreciation and amortization 14,387 5,721
Deferred income taxes 256 2,087
Provision for doubtful accounts 565 296
Minority interests in subsidiaries 2,845 2,089
Changes in assets and liabilities
Accounts receivable 12,685 16,628
Inventories and other current assets ( 186) ( 2,013)
Accounts payable and other current
liabilities (11,572) ( 8,856)
Noncurrent assets and liabilities ( 4,518) ( 2,342)
------- -------
Net cash provided by operating activities 17,737 23,103
------- -------
Cash flows from investing activities
Capital expenditures (22,609) (32,161)
Purchase of a fuel management agreement and
related inventory (8,871) --
Proceeds on sale of property, plant & equipment 3,000 --
Investment in non-consolidated partnerships (5,582) ( 1,911)
------- -------
Net cash used in investing activities (34,062) (34,072)
------- -------
Cash flows from financing activities
Decrease in short-term debt (11,900) ( 2,665)
Proceeds of long-term debt 65,387 36,307
Payments of long-term debt (37,979) (19,559)
Dividends paid (1,261) ( 1,225)
Issuance of common stock, net 1,162 5,711
Proceeds from sale of interest rate caps -- 1,003
Distribution to minority interests (3,544) ( 2,134)
------- -------
Net cash provided by financing activities 11,865 17,438
------- -------
Cash and cash equivalents
Increase/(decrease) (4,460) 6,469
At beginning of period 25,276 20,175
------ -------
At end of period $20,816 $26,644
------- -------
Current $16,074 $13,602
Non-current 4,742 13,042
------- -------
At end of period $20,816 $26,644
------- -------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $12,556 $12,734
------- -------
Income taxes 2,548 2,635
------- -------
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 debt -- 4,250
------- -------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
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
September 30, 1997, and the results of operations for the three and nine months
ended September 30, 1997 and 1996 and the cash flows for the nine months ended
September 30, 1997 and 1996. The results of operations for the three and nine
month periods ended September 30, 1997 and 1996 and cash flows for the nine
month period ended September 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. This change reduced 1997 third
quarter net income by $.8 million or $.07 per common share and reduced net
income for the nine months ended September 30, 1997 by $.2 million or $.01 per
common share. The Company expects the change to positively impact the fourth
quarter results.
3. Sale of Property
In September 1997, the company sold a natural gas pipeline for a pre-tax
gain of $668,000, or $.04 per common share.
4. Condemnation Award
During the third quarter of 1996, the Company was granted a condemnation
award of $6.8 million ($6.4 million, net of expenses) related to one of its
facilities in Boston, Massachusetts. This award was reported in depreciation on
the consolidated statements of operations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Three Months ended September 30, 1997 compared with Three Months ended September
30, 1996
Overview
For the quarter ended September 30, 1997, the Company reported net income
of $.3 million, or $.03 per common share, compared with net income of $2.8
million, or $.24 per common share, in the third quarter last year. Earnings for
both the third quarter of 1997 and 1996 included nonrecurring items. For the
third quarter of 1997, net income included a pre-tax gain of $.7 million, or
$.04 per common share, on the sale of a natural gas pipeline. Earnings for the
third quarter of 1996 included a nonrecurring pre-tax gain of $6.4 million, or
$.36 per common share, resulting from a condemnation award. In addition, 1996
net earnings included an extraordinary loss of $1.9 million after tax, equal to
$.17 per common share, on the early extinguishment of debt. Revenues were $43.0
million in the third quarter compared with $41.6 million last year. Operating
income for the third quarter was $6.5 million compared with $12.8 million a year
ago. Excluding the nonrecurring items and extraordinary loss, the decline in
third quarter 1997 earnings was due to higher depreciation, general and
administrative, and interest expenses. 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 $43.0 million were up $1.4 primarily due to the sale of the
natural gas pipeline. Thermal energy sales declined $.3 million, or 1%, to
$28.8 million, while electric energy sales of $10.2 million were higher by $.2
million or 2%. Units of energy sold increased by 5% in the third quarter.
Energy revenues were higher during the third quarter at Nassau and Tulsa, and
down at Baltimore and Trenton.
Operating Expenses
Fuel and consumables' costs were $15.0 million in both the third quarter of
1997 and 1996. As a percent of revenues, fuel and consumables' costs were 34.9%
in the third quarter of 1997 compared with 36.1% last year.
Production and operating costs were down 1% to $9.8 million in the third
quarter; and as a percent of revenues decreased to 22.7% from 23.7% in 1996.
This reduction was due primarily to higher repair and maintenance costs last
year.
Depreciation expense was $3.4 million compared with a credit of $3.5
million in the third quarter of 1996. Included in 1996 depreciation expense was
a $6.4 million gain resulting from a condemnation award. Excluding this gain,
1997 depreciation was higher by $.5 million, reflecting the high level of
capital expenditures in the second half of 1996.
General and administrative expenses increased 12% in the third quarter to
$8.4 million due to higher legal fees, severance payments and write-offs of
project development costs. As a percent of revenues, general and administrative
expenses increased to 19.4% from 17.9% last year.
Interest Expense, Net
Net interest expense increased 6% to $4.6 million due to the higher level
of debt.
<PAGE>
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 third quarter of 1997 and 39.3% in the third quarter
of 1996.
Nine Months ended September 30, 1997 compared with Nine Months ended September
30, 1996
Overview
For the nine months ended September 30, 1997, the company reported net income
of $3.3 million, or $.27 per common share. This compared to net income of $9.5
million and $.83 per common share last year. Operating income was $21.3 million
on revenues of $174.7 million in the first nine months of 1997 compared with
operating income of $34.2 million on revenues of $176.6 million in 1996.
Revenues
Revenues of $174.7 million were down $1.9 million, or 1%, due to the mild
weather this year. Thermal energy sales were down $6.5 million to $129.2
million, while electric energy sales increased $3.3 million to $35.8 million.
Units of energy sold were down approximately 7% in the first nine 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. Fees earned
and other revenue increased 16% in the nine months ended September 30, 1997 due
to the expansion of the Ewing Power Systems operation, which was acquired in the
first quarter of 1996, and to the sale of the natural gas pipeline. This
increase was partially offset by costs incurred for establishing and marketing
new joint ventures.
Operating Expenses
Fuel and consumables' costs were $81.5 million in 1997 compared with $83.3
million last year. This decrease reflected the lower level of revenues. As a
percent of revenues, fuel and consumables' costs were 46.7% in 1997 and 47.2% in
1996.
Production and operating costs increased 10% to $34.8 million compared with
$31.8 million last year; and as a percent of revenues increased to 19.9% from
18.0% 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.
Offsetting in part the 1997 increase were higher repair and maintenance costs in
1996.
Depreciation expense was $11.6 million compared with $3.9 million last year.
Included in 1996 depreciation expense was a $6.4 million gain resulting from a
condemnation award. Excluding this gain, 1997 depreciation was higher by $1.3
million, reflecting the high level of capital expenditures in the second half of
1996.
General and administrative expenses increased $2.0 million, or 8%, to $25.4
million due mainly to higher legal fees and write-offs of project development
costs. As a percent of revenues, general and administrative expenses were 14.5%
in 1997 and 13.3% in 1996.
Interest Expense, Net
Net interest expense declined slightly to $12.9 million due to repayment of
high interest rate debt, offset in part by the higher level of debt in 1997.
<PAGE>
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 Company's
effective tax rate was 41.0% for the first nine months of 1997 compared with
40.3% last year.
Liquidity and Financial Position
- --------------------------------
Cash and cash equivalents were $20.8 million at September 30, 1997, a
decrease of $4.5 million. Working capital was $2.8 million compared with a
negative $4.7 million at December 31, 1996. At September 30, 1997, receivables
were down 34% to $25.7 million and inventories decreased 4% to $6.6 million from
the balances at the end of 1996. Accounts payable of $4.2 million and accrued
fuel of $8.7 million were down 46% and 39%, respectively. The lower levels of
receivables, inventories and payables at September 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.
In the first nine months of 1997, the Company generated $17.7 million of
cash from operating activities compared with $23.1 million last year. The lower
cash from operations in 1997 was due primarily to the earnings decline and
higher working capital requirements. During the first nine months of 1997, the
Company had net borrowings of $15.5 million and received $3.0 million on the
sale of property, plant and equipment. These funds, along with the $17.7
million of cash generated from operations and available cash at the beginning of
the year were used to invest $22.6 million in capital expenditures and $5.6
million in partnership investments, purchase a fuel management agreement and
related inventory for $8.9 million, and pay $1.3 million in dividends to
shareholders and $3.5 million to minority interests.
At September 30, 1997, total debt was $274.0 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 entered 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 nine months of 1997, stockholders' equity increased $3.2
million to $144.6 million at September 30, 1997. This increase reflects $3.3
million of net income, $1.0 million from the issuance of common stock net of
stock purchases, and $.2 million of proceeds from the exercise of stock options;
offset by $1.3 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.
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.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are filed as part of this report:
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed for the three months
ended September 30, 1997.
<PAGE>
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: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q for quarter ending September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,074
<SECURITIES> 0
<RECEIVABLES> 26,903
<ALLOWANCES> 1,238
<INVENTORY> 6,591
<CURRENT-ASSETS> 56,542
<PP&E> 455,050
<DEPRECIATION> 73,510
<TOTAL-ASSETS> 500,763
<CURRENT-LIABILITIES> 53,696
<BONDS> 249,213
0
0
<COMMON> 121
<OTHER-SE> 144,488
<TOTAL-LIABILITY-AND-EQUITY> 500,763
<SALES> 174,652
<TOTAL-REVENUES> 174,652
<CGS> 127,982
<TOTAL-COSTS> 153,382
<OTHER-EXPENSES> 2,845
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,875
<INCOME-PRETAX> 5,550
<INCOME-TAX> 2,275
<INCOME-CONTINUING> 3,275
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 3,275
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
