<PAGE>
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, 1998
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 10601-1009
(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 12,347,227 shares of the Registrant's Common Stock outstanding as of
July 30, 1998.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Quarter Ended June 30, 1998
Part I - Financial Information: Page
Item 1. Financial Statements
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997
(Unaudited) 3
Consolidated Balance Sheets as of June 30, 1998
(Unaudited) and December 31, 1997 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3.Quantitative and Qualitative Disclosures
About Market Risk. 12
Part II - Other Information: 13
Signatures: 14
Disclosure Regarding Forward-Looking Statements
This Quarterly Report includes historical information as well as statements
regarding the future expectations (referred to as "forward-looking statements")
of Trigen Energy Corporation and its wholly owned subsidiaries (collectively
"Trigen"). Important factors that could cause actual results to differ
materially from those discussed in such forward-looking statements include:
supply/demand balance for Trigen's products, competitive pricing pressures,
weather patterns, changes in industry laws and regulations, adverse judicial
determinations, competitive technology and any failure to achieve Trigen's
cost reduction targets or complete construction projects on schedule. Trigen
believes in good faith that the forward-looking statements in this Quarterly
Report have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in the records of
Trigen and other data available from third parties, but there can be no
guarantee that the expectations described in these forward looking statements
will be fulfilled or accomplished.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 1998 and 1997
Unaudited
(In thousands, except per share data)
Three Months Six Months
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues
Thermal energy $37,068 $34,129 $97,278 $100,453
Electric energy 8,880 11,474 20,209 25,562
Equity in earnings/(losses)
of non-consolidated
partnerships 1,323 (803) 2,026 (693)
Fees earned and other
revenues 3,523 3,307 6,193 6,306
------- ------- ------- --------
Total revenues 50,794 48,107 125,706 131,628
------- ------- ------- --------
Operating expenses
Fuel and consumables 16,582 19,974 51,527 66,477
Production and
operating costs 12,058 10,891 27,138 25,073
Depreciation 4,449 3,526 9,919 8,290
General and
administrative 11,595 7,542 21,218 17,037
------- ------- ------- --------
Total operating
expenses 44,684 41,933 109,802 116,877
------- ------- ------- --------
Operating income 6,110 6,174 15,904 14,751
Other income (expense)
Interest expense (5,826) (4,647) (11,567) (9,126)
Other income, net 4,313 442 4,599 865
------- ------- ------- --------
Earnings before minority
interests, income
taxes and extra-
ordinary item 4,597 1,969 8,936 6,490
Minority interests in
earnings of subsidiaries 782 795 1,575 1,529
------ ------- ------- ----------
Earnings before income
taxes and extraordinary
item 3,815 1,174 7,361 4,961
Income taxes 1,640 481 3,165 2,034
------ ------- ------- ----------
Earnings before extra-
ordinary item 2,175 693 4,196 2,927
Extraordinary loss from
extinguishment of debt,
net of tax benefit -- -- (299) --
------- -------- ------- ----------
Net earnings $2,175 $ 693 $3,897 $ 2,927
------- ------- ------ ----------
Basic earnings per
common share
Before extraordinary
item $ .18 $ .06 $ .35 $ .24
Extraordinary loss -- -- ( .03) --
------- ------- ------ ----------
Net earnings $ .18 $ .06 $ .32 $ .24
------- ------- ------ ----------
Diluted earnings per
common share
Before extraordinary
item $ .18 $ .06 $ .35 $ .24
Extraordinary loss -- -- ( .03) --
------- ------- ------ ----------
Net earnings $ .18 $ .06 $ .32 $ .24
------- ------- ------ ----------
Average shares outstand-
ing - basic 12,031 12,012 12,017 11,998
------- ------- ------ ----------
Average shares outstand-
ing - diluted 12,031 12,117 12,019 12,173
------- ------- ------ ----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 12,431 $ 8,967
Accounts receivable
Trade (less allowance for
doubtful accounts
of $1,371 in 1998 and
$1,074 in 1997) 23,775 34,866
Other 11,461 10,815
-------- --------
Total accounts receivable 35,236 45,681
Inventories 6,641 7,054
Prepaid expenses and other
current assets 8,901 7,985
-------- --------
Total current assets 63,209 69,687
Non-current cash and cash equivalents 4,671 4,726
Property, plant and equipment, net 431,510 388,448
Investment in non-consolidated
partnerships 22,515 19,560
Intangible assets, net 42,054 21,454
Deferred costs and other assets, net 23,789 22,094
-------- --------
Total assets $587,748 $525,969
-------- --------
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ -- $ 14,200
Current portion of long-term debt 15,471 14,499
Accounts payable 3,778 10,053
Accrued fuel 10,606 11,545
Accrued expenses and other current
liabilities 29,081 21,485
-------- --------
Total current liabilities 58,936 71,782
Long-term debt 320,173 256,361
Other liabilities 5,062 4,786
Deferred income taxes 38,207 31,237
-------- --------
Total liabilities 422,378 364,166
Minority interests in subsidiaries 16,348 16,321
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 12,417,934 shares in
1998 and 12,070,162 shares in 1997 124 121
Additional paid-in capital 120,857 114,157
Retained earnings 34,915 31,881
Unearned compensation - restricted
stock ( 5,557) --
Cumulative translation adjustment 315 296
Treasury stock, at cost, 88,965
shares in 1998 and 45,500
shares in 1997 ( 1,632) (973)
--------- ---------
Total stockholders' equity 149,022 145,482
-------- --------
Total liabilities and stockholders'
equity $587,748 $525,969
-------- --------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
Unaudited
(In thousands)
<S> <C> <C>
1998 1997
---- -----
Cash flows from operating activities
Net earnings $ 3,897 $2,927
Reconciliation of net earnings to cash
provided by operating activities
Extraordinary item 299 --
Depreciation and amortization 12,617 10,038
Deferred income taxes 202 433
Provision for doubtful accounts 269 317
Minority interests in subsidiaries 1,575 1,529
Changes in assets and liabilities
Accounts receivable 10,181 1,931
Inventories and other current assets 417 (973)
Accounts payable and other current
liabilities ( 1,364) (2,322)
Noncurrent assets and liabilities ( 3,457) (1,334)
------- ------
Net cash provided by operating
activities 24,636 22,546
------- ------
Cash flows from investing activities
Acquisition of Power Sources, Inc. (44,100) --
Capital expenditures (20,133) (13,947)
Investment in non-consolidated
partnerships ( 990) (1,100)
------- ------
Net cash used in investing
activities (65,223) (15,047)
------- ------
Cash flows from financing activities
Short-term debt, net (14,200) (18,500)
Proceeds of long-term debt 84,850 43,978
Payments of long-term debt (24,356) (34,919)
Dividends paid ( 863) (841)
Issuance of common stock, net 115 1,292
Distribution to minority interests ( 1,550) (900)
------- ------
Net cash provided by (used in)
financing activities 43,996 (9,890)
------- ------
Cash and cash equivalents
Increase (decrease) 3,409 (2,391)
At beginning of period 13,693 25,276
------- ------
At end of period $17,102 $22,885
------- ------
Current $12,431 $14,053
Non current 4,671 8,832
------- ------
At end of period $17,102 $22,885
------- ------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $10,606 $8,320
------- ------
Income taxes 1,421 2,264
------- ------
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 and industrial energy systems in the United States and Canada. The
Company uses its expertise in thermal engineering and proprietary cogeneration
processes to convert fuel to various forms of thermal energy and electricity.
The Company combines heat and power generation, producing electricity as a
by-product, for use in its facilities and for sale to customers.
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, 1998, and the results of operations for the three and six months ended
June 30, 1998 and 1997 and the cash flows for the six months ended June 30, 1998
and 1997. The results of operations for the three and six month periods ended
June 30, 1998 and cash flows for the six month period ended June 30, 1998 are
not indicative of those to be expected for the year ending December 31, 1998.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1997 included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. Certain reclassifications have been made to the
1997 financial statements to conform to the 1998 presentation.
2. Change in Accounting Policy
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires
costs of start-up activities and organizational costs to be expensed as
incurred. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998. Earlier application of SOP 98-5 is
encouraged in fiscal years for which annual financial statements have not yet
been issued.
The Company is in process of evaluating the impact SOP 98-5 will have on the
Company's results of operations and financial condition.
3. Supplementary Income Information
Included in other income, net for the three months and six months ended
June 30, 1998 were gains of $2,102,000 from the sale of nitrogen oxide emission
allowances and $1,678,000 from an insurance settlement.
4. Extraordinary Item
The Company incurred an extraordinary charge of $299,000, net of a tax
benefit of $161,000, in the six months ended June 30, 1998 in connection with
the early retirement of debt.
5. Acquisition
On January 22, 1998, the Company acquired all of the capital stock of Power
Sources, Inc. (renamed Trigen-BioPower, Inc.), a biomass-to-energy power plant
developer and operator, for a total cash investment of $44,100,000, funded from
the Company's existing credit facility. Trigen-BioPower had revenues of
$18,967,000 and net earnings of $2,441,000 for the twelve-month period ended
December 31, 1997. Results for Trigen-Bio-Power are included with those of the
Company since the date of acquisition.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The acquisition was accounted for under the purchase method of accounting.
The purchase price has been allocated to the assets acquired and liabilities
assumed based on fair market value at the date of acquisition. The excess of
the purchase price over the net assets acquired was $10,398,000 and is being
amortized over a period not exceeding 30 years. The fair value of the assets
acquired and liabilities assumed is as follows (in thousands):
Current assets $ 3,325
Property, plant and equipment 32,265
Intangibles 11,687
Costs in excess of net assets acquired 10,398
Current liabilities ( 2,147)
Long-term debt ( 4,290)
Other liabilities ( 7,138)
--------
Total purchase price $44,100
--------
The following pro forma summary presents the consolidated results of
operations for the three and six months ended June 30, 1997 and the six months
ended June 30, 1998 as if the acquisition had occurred at the beginning of the
years presented (in thousands, except per share data):
Three
Months Six Months Ended
Ended June 30,
June 30, -------------------
1997 1998 1997
-------- ---- ----
Revenues $52,625 126,843 $141,064
Earnings before extraordinary item 724 4,266 3,253
Diluted earnings per common share --
before extraordinary item .06 .35 .27
The pro forma results included certain adjustments for depreciation expense
as a result of a step up in the basis of property, plant and equipment and an
increase in the remaining lives, amortization expense as a result of goodwill
and other intangible assets and interest expense on borrowings to finance the
acquisition. The pro forma results do not purport to be indicative of the
results of operations which actually would have resulted had the acquisition
been made at the beginning of the years presented, or of results which may occur
in the future.
6. Legal Proceeding
On April 9, 1998, Grays Ferry Cogeneration Partnership, Trigen-Schuylkill
Cogeneration, Inc., CogenAmerica Schuylkill Inc. (formerly NRGG Schuylkill
Cogeneration Inc.) and Trigen-Philadelphia Energy Corporation commenced an
action against PECO Energy Company ("PECO") and Adwin (Schuylkill) Cogeneration,
Inc. in the Pennsylvania Court of Common Pleas of Philadelphia County (the
"Court"). Grays Ferry Cogeneration Partnership (the "Partnership") is the owner
of the Grays Ferry Cogeneration Facility located in Philadelphia, Pennsylvania.
At June 30, 1998, the Company had an investment of $14,705,000 in the
Partnership, representing a one third interest in the Partnership through its
wholly owned subsidiary, Trigen-Schuylkill Cogeneration, Inc. CogenAmerica
Schuylkill Inc. and Adwin (Schuylkill) Cogeneration, Inc. own the other two
thirds interests in the Partnership. Adwin (Schuylkill) Cogeneration, Inc. is an
indirect wholly owned subsidiary of PECO. In addition, at June 30, 1998 the
Company had a receivable of $4,437,000 due from the Partnership. Included in the
Company's earnings before income taxes for the three months and six months ended
June 30, 1998 was the Company's
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
share of Partnership earnings of $1,719,000 and $2,705,000, respectively, and
fees earned from the Partnership of $1,024,000 and $1,452,000, respectively.
This compared to fees earned from the Partnership of $175,000 and $325,000 in
the three months and six months ended June 30, 1997, respectively.
The Partnership commenced this action in reaction to the wrongful
termination by PECO on March 3, 1998, of the electric power purchase agreement
between the Partnership and PECO (the "Power Purchase Agreement"). The
Partnership is seeking a declaratory judgement to require PECO to comply with
the Power Purchase Agreement and for damages to be proven at trial in an amount
in excess of $200 million.
On May 6, 1998, the Court issued a preliminary injunction against PECO
which requires PECO to pay the Partnership for its electric energy and capacity
at the rates set forth in the Power Purchase Agreement and otherwise to
specifically perform the Power Purchase Agreement. On July 7, 1998, PECO
withdrew its appeal of the preliminary injunction, which will now remain in
effect until the Court renders its decision after the final hearing of this
matter. The final hearing is currently scheduled to occur in March of 1999.
The Chase Manhattan Bank has issued notices of default to the Partnership
under the terms of the Credit Agreement, dated as of March 1, 1996, between the
Partnership, The Chase Manhattan Bank, as agent and certain other commercial
banks (collectively the "Banks"). The Partnership's debt under the Credit
Agreement of $106,929,000 is secured only by the Partnership assets and the
partners' ownership interests in the Partnership. The Banks have not accelerated
the debt owing under the Credit Agreement nor imposed default interest charges
against the Partnership, although the Banks could take these actions in the
future. The Banks have required to date, and may require in the future, the
Partnership to apply available cash held by Partnership (net of operating
expenses, other than certain payments to affiliates, and expenses required to
complete construction) toward repayment of the principal amount of the loans
outstanding.
The Company believes that PECO's termination of the Power Purchase
Agreement was wrongful and the Company intends to aggressively pursue the
remedies available to it. In the event the Company is not successful and PECO's
actions are upheld, PECO would be required under PURPA to continue to purchase
power from the Grays Ferry Cogeneration Facility at PECO's avoided cost. This
would generate significantly lower earnings per share for the Company than the
1998 annual earnings per share of $.40 to $.52 that the Company previously
forecast, based on the contracted power purchase price. While it is possible
that the Company's investment in the Partnership and the receivable from the
Partnership could become impaired, at this time the Company does not believe
that is likely.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
7. Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This statement
requires disclosure of all items recognized under accounting standards as
components of comprehensive income. Following are the Company's components of
comprehensive income for the three and six months ended June 30, 1998 and 1997
(in thousands).
Three MonthsEnded Six Months Ended
June 30, June 30,
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
Net earnings $2,175 $ 693 $3,897 $2,927
Other comprehensive
Income Cumulative
translation
adjustment 22 -- 19 39
Comprehensive income $2,197 $ 693 $3,916 $2,966
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months ended June 30, 1998 compared with Three Months ended June 30, 1997.
Overview
- --------
For the quarter ended June 30, 1998, the Company reported earnings before
extraordinary item of $2.2 million or $.18 per diluted share. This compared
with $.7 million and $.06 of diluted earnings per share in the second quarter of
1997. Revenues were $50.8 million in the second quarter compared with $48.1
million last year. Operating income was $6.1 million and the operating margin
was 12.0% in the second quarter of 1998 compared with operating income of $6.2
million and an operating margin of 12.8% in the like quarter last year.
Operating results for 1998 include those of the newly acquired Trigen-BioPower
from January 22, 1998, the date of acquisition. Trigen-BioPower contributed
$4.6 million in revenues and $1.0 million in operating income to second quarter
operating results. A significant portion of 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.
Revenues
Revenues of $50.8 million were up $2.7 million from the second quarter of
1997. Thermal energy sales increased $2.9 million reflecting the $4.6 million
revenue contribution by Trigen-BioPower. A decline in units of thermal energy
sold at systems in Baltimore, Philadelphia and St. Louis offset in part the
higher thermal energy sales. Electric energy sales were $8.9 million, down $2.6
million from the like quarter in 1997. This decline was due to the trigenera-
tion plant in Nassau County, New York being taken off line for 22 days during
the second quarter for major overhaul work. The increase in earnings/(losses)
of non-consolidated partnerships results from recognition of $1.7 million of
earnings from the Grays Ferry Cogeneration Partnership.
Operating Expenses
Fuel and consumables' costs were $16.6 million in the second quarter
compared with $20.0 million last year. This decrease was due to the lower level
of thermal energy revenues at systems principally located in the Northeast, the
outage at the Nassau plant and savings realized from the purchase of a fuel
management contract in 1997.
Production and operating costs increased 11% to $12.1 million in the second
quarter due mainly to the inclusion of production and operating costs for
Trigen-BioPower.
Depreciation expense was $4.4 million compared with $3.5 million in 1997.
The increase reflects the higher level of capital expenditures and depreciation
expense of Trigen-BioPower.
General and administrative expenses were up $4.1 million in the quarter due
primarily to a $2.0 million increase in insurance and employee-related costs and
to the inclusion of general and administrative expenses for Trigen-BioPower.
Interest Expense
Interest expense increased $1.2 million to $5.8 million in the second
quarter reflecting the increased level of borrowing, primarily the $44.1 million
of borrowings under the Company's credit facility to finance the Trigen-BioPower
acquisition.
<PAGE>
Other Income, Net
The $3.9 million increase in other income, net in the second quarter
results from gains of $2.1 million from the sale of nitrogen oxide emission
allowances and $1.7 million from an insurance settlement. The agreements for the
sale of nitrogen oxide emissions allowances anticipate that regulations
establishing a nitrogen oxide emissions allowances trading system will be
established by the United States Environmental Protection Agency (the "EPA")
for an area which includes the States where the subject nitrogen oxide
emissions allowances will be used. In the event that the EPA fails to adopt
such regulations, these sales may be rescinded.
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 for the second quarter of 1998 and 1997 was 43.0% and 41.0%, respec-
tively.
Six months ended June 30, 1998 compared with six months ended June 30,
1997.
Overview
- --------
For the six months ended June 30, 1998, the Company reported earnings
before extraordinary item of $4.2 million or $.35 per diluted share. This
compared with $2.9 million and $.24 per diluted earnings per share last year.
Operating income was $15.9 million on revenues of $125.7 million in the first
six months of 1998 compared with operating income of $14.8 million on revenues
of $131.6 million in 1997. The operating margin was 12.7% in 1998 compared with
11.2% in 1997. Trigen-BioPower contributed $8.3 million in revenues and $1.9
million in operating income to operating results for the six months ended
June 30, 1998.
Revenues
Revenues of $125.7 million were down $5.9 million or 4% from 1997. Thermal
energy sales were down $3.2 million to $97.3 million and electric energy sales
were down $5.4 million to $20.2 million. The decline in thermal energy sales
was due principally to the mild winter weather, particularly in the Northeast,
that adversely impacted our energy systems in Baltimore, Boston, Philadelphia
and St. Louis. The decline in thermal energy sales was partially offset by the
$8.3 million revenue contribution of Trigen-BioPower. Electric energy sales
were down as a result of the Nassau plant being taken off line by the local
utility, as permitted under the contract, for a longer period of time in 1998
than in 1997. Also in 1998, this facility was taken off line for 22 days for
major overhaul work. The increase in earnings /(losses) of non-consolidated
partnerships results from recognition of $2.7 million of earnings from the
Grays Ferry Cogeneration Partnership.
Operating Expenses
Fuel and consumables' costs were $51.5 million in 1998 compared with $66.5
million last year. This decrease reflects the lower level of energy revenues at
systems primarily located in the Northeast, the outages at the Nassau plant and
savings realized from the purchase of a fuel management contract in 1997.
Production and operating costs increased 8% to $27.1 million due mainly to
the inclusion of production and operating costs for Trigen-BioPower.
Depreciation expense was $9.9 million compared with $8.3 million last year.
The increase reflects the higher level of capital expenditures and depreciation
expense of Trigen-BioPower.
General and administrative expenses increased $4.2 million in the first six
months of 1998 due primarily to a $2.0 million increase in insurance and
employee-related costs and to the inclusion of general and administrative
expenses for Trigen-BioPower.
<PAGE>
Interest Expense
Interest expense increased $2.4 million to $11.6 million in 1998 due to the
increased level of borrowing, primarily the $44.1 million of borrowings to
finance the Trigen-BioPower acquisition.
Other Income, Net
The $3.7 million increase in other income, net results from gains of $2.1
million from the sale of nitrogen oxide emission allowances and $1.7 million
from an insurance settlement.
Income Taxes
The Company's effective tax rate was 43% for the first six months of 1998
compared with 41% last year.
Extraordinary Item
The Company incurred an extraordinary charge of $.3 million, net of a $.2
million income tax benefit, in the first quarter of 1998 in connection with the
early retirement of debt.
Liquidity and Financial Position
Cash and cash equivalents were $17.1 million at June 30, 1998, an increase
of $3.4 million from year-end 1997. Working capital was $4.3 million compared
with a negative $2.1 million at December 31, 1997. At June 30, 1998,
receivables were down 23% to $35.2 million and inventories decreased 6% to $6.6
million from the balances at the end of 1997. Accounts payable was down $6.3
million to $3.8 million, and accrued expenses and other current liabilities were
up $7.6 million to $29.1 million at June 30, 1998. The Company's working
capital requirements vary in line with the peak heating demand in the winter and
peak cooling demand in the summer.
During the first six months of 1998, the Company generated $24.6 million of
cash from operating activities compared with $22.5 million last year. The
improvement was due to the cash generated by Trigen-BioPower and improved net
earnings. During the first six months of 1998, the Company acquired Trigen-
BioPower for $44.1 million, invested $20.1 million in capital expenditures and
$1.0 million in partnership investments, and paid dividends of $.9 million to
shareholders and $1.6 million to minority interests. These expenditures were
financed by the cash generated from operating activities and by $46.3 million of
net new borrowings.
Total debt was $335.7 million at June 30, 1998 compared with $285.1 million
at the end of 1997. The $50.6 million increase in debt includes $4.3 million of
Trigen-BioPower debt assumed in the acquisition. In February 1998, $14.4
million of Trigen-Nassau bonds, with a fixed tax-exempt rate of 7.75%, were
refinanced by a new issue of variable rate demand tax-exempt bonds. This
refinancing resulted in an extraordinary charge of $.3 million, net of a $.2
million income tax benefit.
During the first six months of 1998, stockholders' equity increased $3.5
million to $149.0 million at June 30, 1998. This increase reflects $3.9 million
of net earnings, $.4 million of amortization of unearned compensation related to
restricted shares and $.1 million from the issuance of common stock, net of
stock purchases, offset by $.9 million of dividend payments to shareholders.
For the six month period ended June 30, 1998, 47,000 shares of common stock were
purchased for the treasury at a cost of $.8 million.
Reference is made to Note 6 of the Notes to Consolidated Financial
Statements with respect to legal proceedings involving the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings.
------------------
Reference is made to Note 6 of the Notes to Consolidated Financial State-
ments with respect to legal proceedings involving the Company, which was
reported in the Company's Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of security holders was held in Baltimore, Maryland
on May 13, 1998. The security holders voted, as recommended by management, for
the election to the Board of Directors of Mr. Richard E. Kessel (10,385,533
votes for and 28,639 votes withheld).
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit is filed as part of this
report:
27* Financial Data Schedule
(b) The following reports on Form 8-K were filed during
the three months ended June 30, 1998.
Item 4. Change in Registrant's Certifying
Accountant, Amendment No. 3, April 7, 1998
Item 4. Change in Registrant's Certifying
Accountants, May 13, 1998
* Filed herewith.
<PAGE>
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 under-
signed thereunto duly authorized.
TRIGEN ENERGY CORPORATION
/s/ Daniel J. Samela
------------------------------
Daniel J. Samela
Controller
/s/ Steven T. Ward
------------------------------
Steven T. Ward
Treasurer
Date: August 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q for quarter ending June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
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