-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JLv5T3jD+gKcxS8euzj2cDKJCWJ9KwV9wf8ORmLbHE0R5AP/XoutMbIsvYvO78RE uKzLqoeQNKY485Sh4E4s6w== 0000741612-95-000027.txt : 19951121 0000741612-95-000027.hdr.sgml : 19951121 ACCESSION NUMBER: 0000741612-95-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 DATE AS OF CHANGE: 19951117 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TNP ENTERPRISES INC CENTRAL INDEX KEY: 0000741612 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 751907501 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08847 FILM NUMBER: 95593432 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXAS NEW MEXICO POWER CO CENTRAL INDEX KEY: 0000022767 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 750204070 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-97230 FILM NUMBER: 95593433 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 MAIL ADDRESS: STREET 1: 4100 INTERNATIONAL PLAZA STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNITY PUBLIC SERVICE CO DATE OF NAME CHANGE: 19810617 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) (X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 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 Number: 1-8847 TNP ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Texas 75-1907501 (State of incorporation) (I.R.S. employer identification number) 4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113 (Address and zip code of principal executive offices) Registrant's telephone number, including area code 817-731-0099 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 \ \ TNP Enterprises, Inc. had 10,914,076 shares of common stock outstanding as of October 26, 1995. Commission File Number: 2-97230 TEXAS-NEW MEXICO POWER COMPANY (Exact name of registrant as specified in its charter) Texas 75-0204070 (State of incorporation) (I.R.S. employer identification number) 4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113 (Address and zip code of principal executive offices) Registrant's telephone number, including area code 817-731-0099 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 \ \ Texas-New Mexico Power Company had 10,705 shares of common stock outstanding as of October 26, 1995. Page 1 TNP Enterprises, Inc. And Subsidiaries Texas New-Mexico Power Company And Subsidiaries Combined Quarterly Report on Form 10-Q for the period ended September 30, 1995 This Combined Quarterly Report on Form 10-Q is separately filed by TNP Enterprises, Inc., and Texas-New Mexico Power Company. Texas-New Mexico Power Company makes no representation as to information relating to TNP Enterprises, Inc., except as it may relate to Texas- New Mexico Power Company, or to any other affiliate or subsidiary of TNP Enterprises, Inc. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements. (Unaudited for Periods Ended September 30, 1995, and 1994) TNP Enterprises, Inc. ("TNPE") and Subsidiaries: Consolidated Statements of Operations Three- and Nine-Month Periods Ended September 30, 1995, and 1994 3 Consolidated Statements of Cash Flows Nine-Month Periods Ended September 30, 1995, and 1994 4 Consolidated Balance Sheets September 30, 1995, and December 31, 1994 5 Texas-New Mexico Power Company ("TNMP") and Subsidiaries: Consolidated Statements of Operations Three- and Nine-Month Periods Ended September 30, 1995, and 1994 6 Consolidated Statements of Cash Flows Nine-Month Periods Ended September 30, 1995, and 1994 7 Consolidated Balance Sheets September 30, 1995, and December 31, 1994 8 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 14 Item 6. Exhibits and Reports on Form 8-K. 14 (a) Exhibit Index 14 (b) Reports on Form 8-K 14 Signature page (TNPE and TNMP) 15
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The following interim consolidated financial statements of TNPE and subsidiaries and TNMP and subsidiaries are unaudited. The 1995 financial statements reflect the sale of the Texas Panhandle properties, a change in accounting for unbilled revenues, and recognition of revenues that previously were deferred, as described in Notes to Consolidated Financial Statements. The 1994 financial statements reflect the recognition of regulatory disallowances. In management's opinion, the financial statements reflect all other adjustments (consisting only of normal recurring accruals) necessary to state fairly results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year or for previously reported periods, due in part to seasonal revenue fluctuations and certain one-time items. Amounts shown for TNPE and TNMP at December 31, 1994, are based on audited consolidated financial statements appearing in TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K. Page 2
TNP ENTERPRISES, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 (In Thousands Except Per Share Amounts) OPERATING REVENUES (note 3) $151,586 $149,864 $378,470 $ 368,509 OPERATING EXPENSES: Power purchased for resale 52,060 59,788 138,715 151,790 Fuel 15,815 14,793 38,040 35,722 Other operating and general expenses 18,172 18,387 53,985 54,240 Maintenance 2,843 2,929 8,567 8,990 Depreciation of utility plant 9,544 9,132 28,458 27,459 Taxes, other than on income 8,158 8,853 21,866 23,443 Income taxes (note 4) 9,847 4,998 11,548 2,555 Total operating expenses 116,439 118,880 301,179 304,199 NET OPERATING INCOME 35,147 30,984 77,291 64,310 OTHER INCOME (LOSS): Gain on sale of Texas Panhandle properties (note 1) 14,583 - 14,583 - Recognition of regulatory disallowances - - - (31,546) Other income and deductions, net 572 761 1,097 898 Income taxes (note 4) (5,299) (787) (5,697) 10,189 Other income (loss), net of taxes 9,856 (26) 9,983 (20,459) EARNINGS BEFORE INTEREST CHARGES AND CHANGE IN ACCOUNTING 45,003 30,958 87,274 43,851 INTEREST CHARGES: Interest on long-term debt 17,638 18,028 54,227 53,720 Other interest and amortization of debt-related costs 676 1,059 2,635 2,959 Allowance for borrowed funds used during construction (39) (50) (126) (211) Total interest charges 18,275 19,037 56,736 56,468 EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 26,728 11,921 30,538 (12,617) Cumulative effect of change in accounting for unbilled revenues, net of taxes (notes 2, 4) - - 8,445 - NET EARNINGS (LOSS) 26,728 11,921 38,983 (12,617) Dividends on preferred stock 152 189 520 601 EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $26,576 $11,732 $38,463 $(13,218) EARNINGS (LOSS) PER SHARE OF COMMON STOCK: Earnings (loss) before cumulative effect of change in accounting $ 2.44 $ 1.09 $ 2.75 $ (1.23) Cumulative effect of change in accounting for unbilled revenues - - 0.78 - Earnings (loss) per share $ 2.44 $ 1.09 $ 3.53 $ (1.23) DIVIDENDS PER SHARE $ 0.20 $ 0.20 $ 0.60 $ 1.015 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,909 10,752 10,896 10,726 PRO FORMA AMOUNTS ASSUMING RETROACTIVE APPLICATION OF CHANGE IN ACCOUNTING : Earnings (loss) applicable to common stock $26,576 $10,290 $30,018 $(12,332) Earnings (loss) per share $ 2.44 $ 0.96 $ 2.75 $ (1.15)
See accompanying Notes to Consolidated Financial Statements. Page 3
TNP ENTERPRISES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, September 30, 1995 1994 (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $373,127 $365,095 Power purchased for resale (138,838) (150,270) Fuel costs paid (32,434) (36,568) Cash paid to other suppliers and for payroll (52,551) (60,706) Interest paid, net of amounts capitalized (58,929) (62,633) Income taxes paid (781) (56) Other taxes paid, net of amounts capitalized (24,652) (23,950) Other operating cash receipts and payments, net 916 (434) NET CASH PROVIDED BY OPERATING ACTIVITIES 65,858 30,478 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (19,956) (21,218) Net proceeds from sale of Texas Panhandle properties 29,009 - Purchases of temporary investments (11,171) (5,522) Maturities of temporary investments 10,612 - NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,494 (26,740) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (7,062) (11,484) Issuances: Common stock 743 1,503 Borrowings under secured notes payable 28,000 151,500 Redemptions: Preferred stock (1,100) (700) Repayments under secured notes payable (64,000) (142,529) Long-term debt - first mortgage bonds (1,070) (1,070) NET CASH USED IN FINANCING ACTIVITIES (44,489) (2,780) NET CHANGE IN CASH AND CASH EQUIVALENTS 29,863 958 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,297 12,423 CASH AND CASH EQUIVALENTS AT END OF PERIOD $45,160 $13,381 RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net earnings (loss) $38,983 $(12,617) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Cumulative effect of change in accounting for unbilled revenues, net of taxes (8,445) - Recognition of deferred revenues (4,782) - Gain on sale of Texas Panhandle properties (14,583) - Depreciation of utility plant 28,458 27,459 Amortization of debt-related costs and other deferred charges 3,634 4,399 Allowance for borrowed funds used during construction (126) (211) Deferred income taxes (excluding effect of change in accounting) 4,138 (9,230) Investment tax credits 2,263 (485) Recognition of regulatory disallowances - 31,546 Cash flows impacted by changes in current assets and liabilities: Customer receivables 3 (4,364) Deferred purchased power and fuel costs 5,959 (1,071) Accounts payable 7,195 2,689 Accrued interest (4,454) (8,743) Accrued taxes 7,615 666 Changes in other current assets and liabilities 1,232 1,316 Other, net (1,232) (876) NET CASH PROVIDED BY OPERATING ACTIVITIES $65,858 $30,478
See accompanying Notes to Consolidated Financial Statements. Page 4
TNP ENTERPRISES, INC. AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1995 December 31, (Unaudited) 1994 (In Thousands) ASSETS UTILITY PLANT (note 1): Electric plant $1,187,339 $1,192,277 Construction work in progress 3,271 3,816 Total 1,190,610 1,196,093 Less accumulated depreciation 245,974 228,820 Net utility plant 944,636 967,273 NONUTILITY PROPERTY, at cost 1,159 1,308 CURRENT ASSETS: Cash and cash equivalents (note 1) 45,160 15,297 Temporary investments 6,149 5,590 Customer receivables (note 2) 16,822 3,832 Inventories, at lower of average cost or market: Fuel 1,051 1,157 Materials and supplies 7,724 7,527 Deferred purchased power and fuel costs 9,299 15,258 Accumulated deferred taxes on income 53 2,702 Other current assets 1,181 1,817 Total current assets 87,439 53,180 REGULATORY TAX ASSETS 16,642 17,304 DEFERRED CHARGES 29,997 32,727 $1,079,873 $1,071,792 CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stockholders' equity: Common stock - no par value per share. Shares authorized 50,000,000; issued 10,914,076 shares in 1995 and 10,866,441 in 1994 $134,860 $134,117 Retained earnings 82,677 50,752 Total common stockholders' equity 217,537 184,869 Preferred stock 7,580 8,680 Long-term debt, less current maturities (note 1) 616,588 682,832 Total capitalization 841,705 876,381 CURRENT LIABILITIES: Current maturities of long-term debt 31,870 2,670 Accounts payable 29,146 21,951 Accrued interest 7,239 11,693 Accrued taxes 25,337 17,722 Customers' deposits 2,756 3,973 Revenues subject to refund (note 3) - 4,782 Other current liabilities 12,525 10,621 Total current liabilities 108,873 73,412 REGULATORY TAX LIABILITIES 43,404 47,307 ACCUMULATED DEFERRED INCOME TAXES 56,237 46,960 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 19,176 16,912 DEFERRED CREDITS 10,478 10,820 COMMITMENTS AND CONTINGENCIES (notes 1, 4) $1,079,873 $1,071,792
See accompanying Notes to Consolidated Financial Statements. Page 5
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 (In Thousands) OPERATING REVENUES (note 3) $151,586 $149,864 $378,470 $368,509 OPERATING EXPENSES: Power purchased for resale 52,060 59,788 138,715 151,790 Fuel 15,815 14,793 38,040 35,722 Other operating and general expenses 18,172 18,387 53,985 54,240 Maintenance 2,843 2,929 8,567 8,990 Depreciation of utility plant 9,544 9,132 28,458 27,459 Taxes, other than on income 8,158 8,853 21,866 23,443 Income taxes (note 4) 9,847 4,998 11,548 2,555 Total operating expenses 116,439 118,880 301,179 304,199 NET OPERATING INCOME 35,147 30,984 77,291 64,310 OTHER INCOME (LOSS): Gain on sale of Texas Panhandle properties (note 1) 14,583 - 14,583 - Recognition of regulatory disallowances - - - (31,546) Other income and deductions, net 657 888 1,252 1,239 Income taxes (note 4) (5,329) (320) (5,593) 10,581 Other income (loss), net of taxes 9,911 568 10,242 (19,726) EARNINGS BEFORE INTEREST CHARGES AND CHANGE IN ACCOUNTING 45,058 31,552 87,533 44,584 INTEREST CHARGES: Interest on long-term debt 17,638 18,028 54,227 53,720 Other interest and amortization of debt-related costs 676 1,059 2,635 2,959 Allowance for borrowed funds used during construction (39) (50) (126) (211) Total interest charges 18,275 19,037 56,736 56,468 EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 26,783 12,515 30,797 (11,884) Cumulative effect of change in accounting for unbilled revenues, net of taxes (notes 2, 4) - - 8,445 - NET EARNINGS (LOSS) 26,783 12,515 39,242 (11,884) Dividends on preferred stock 152 189 520 601 EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $26,631 $12,326 $38,722 $(12,485) PRO FORMA EARNINGS (LOSS) APPLICABLE TO COMMON STOCK ASSUMING RETROACTIVE APPLICATION OF CHANGE IN ACCOUNTING $26,631 $10,884 $30,277 $(11,599)
See accompanying Notes to Consolidated Financial Statements. Page 6
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, September 30, 1995 1994 (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $373,127 $365,095 Power purchased for resale (138,838) (150,270) Fuel costs paid (32,434) (36,568) Cash paid to other suppliers and for payroll (52,327) (60,882) Interest paid, net of amounts capitalized (58,929) (62,633) Income taxes paid (1,037) (944) Other taxes paid, net of amounts capitalized (24,301) (23,950) Other operating cash receipts and payments, net 595 129 NET CASH PROVIDED BY OPERATING ACTIVITIES 65,856 29,977 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (19,956) (21,218) Net proceeds from sale of Texas Panhandle properties 29,009 - CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES 9,053 (21,218) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (525) (9,401) Issuances: Borrowings under secured notes payable 28,000 151,500 Redemptions: Preferred stock (1,100) (700) Repayments under secured notes payable (64,000) (142,529) Long-term debt - first mortgage bonds (1,070) (1,070) NET CASH USED IN FINANCING ACTIVITIES (38,695) (2,200) NET CHANGE IN CASH AND CASH EQUIVALENTS 36,214 6,559 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,614 2,078 CASH AND CASH EQUIVALENTS AT END OF PERIOD $44,828 $8,637 RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net earnings (loss) $39,242 $(11,884) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Cumulative effect of change in accounting for unbilled revenues, net of taxes (8,445) - Recognition of deferred revenues (4,782) - Gain on sale of Texas Panhandle properties (14,583) - Depreciation of utility plant 28,458 27,459 Amortization of debt-related costs and other deferred charges 3,634 4,399 Allowance for borrowed funds used during construction (126) (211) Deferred income taxes (excluding effect of change in accounting) 4,003 (9,246) Investment tax credits 2,271 (428) Recognition of regulatory disallowances - 31,546 Cash flows impacted by changes in current assets and liabilities: Customer receivables 3 (4,364) Deferred purchased power and fuel costs 5,959 (1,071) Accounts payable 7,195 2,689 Accrued interest (4,454) (8,743) Accrued taxes 7,398 (68) Changes in other current assets and liabilities 1,493 787 Other, net (1,410) (888) NET CASH PROVIDED BY OPERATING ACTIVITIES $65,856 $29,977
See accompanying Notes to Consolidated Financial Statements. Page 7
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) Consolidated Balance Sheets September 30, 1995 December 31, (Unaudited) 1994 (In Thousands) ASSETS UTILITY PLANT (note 1): Electric plant $1,187,339 $1,192,277 Construction work in progress 3,271 3,816 Total 1,190,610 1,196,093 Less accumulated depreciation 245,974 228,820 Net utility plant 944,636 967,273 NONUTILITY PROPERTY, at cost 175 183 CURRENT ASSETS: Cash and cash equivalents (note 1) 44,828 8,614 Customer receivables (note 2) 16,822 3,832 Inventories, at lower of average cost or market: Fuel 1,051 1,157 Materials and supplies 7,724 7,527 Deferred purchased power and fuel costs 9,299 15,258 Accumulated deferred taxes on income 53 2,702 Other current assets 1,212 1,958 Total current assets 80,989 41,048 REGULATORY TAX ASSETS 16,642 17,304 DEFERRED CHARGES 31,829 34,674 $1,074,271 $1,060,482 CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stockholder's equity: Common stock, $10 par value per share. Authorized 12,000,000 shares; issued 10,705 shares $ 107 $ 107 Capital in excess of par value 175,111 175,111 Retained earnings 49,281 10,559 Total common stockholder's equity 224,499 185,777 Redeemable cumulative preferred stock 7,580 8,680 Long-term debt, less current maturities (note 1) 616,588 682,832 Total capitalization 848,667 877,289 CURRENT LIABILITIES: Current maturities of long-term debt 31,870 2,670 Accounts payable 29,146 21,951 Accrued interest 7,239 11,693 Accrued taxes 24,296 16,898 Customers' deposits 2,756 3,973 Revenues subject to refund (note 3) - 4,782 Other current liabilities 12,525 10,622 Total current liabilities 107,832 72,589 REGULATORY TAX LIABILITIES 43,404 47,307 ACCUMULATED DEFERRED INCOME TAXES 45,911 36,769 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 17,979 15,708 DEFERRED CREDITS 10,478 10,820 COMMITMENTS AND CONTINGENCIES (notes 1, 4) $1,074,271 $1,060,482
See accompanying Notes to Consolidated Financial Statements. Page 8 TNP Enterprises, Inc. and Subsidiaries Texas-New Mexico Power Company and Subsidiaries Notes to Consolidated Financial Statements (1) Sale of Texas Panhandle Properties TNMP completed the $29.2 million sale of its Texas Panhandle properties to Southwestern Public Service Company ("SPS") on September 15, 1995, and recognized a net of tax gain of $9.5 million, or $0.87 per share. The sale was consummated pursuant to the sale agreement between TNMP and SPS discussed in TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K on page 52. The Panhandle properties comprised a relatively small portion of TNMP's business. The book value of the Panhandle properties sold was $14.3 million. For the nine- month period ended September 30, 1995, revenues for the properties were $7.4 million with corresponding sales of 76.3 gigawatt-hours to 7,350 customers. The $29.2 million in proceeds received from SPS were deposited directly with Bank of America, Illinois, as Trustee, to redeem $29.2 million of Series T First Mortgage Bonds ("FMBs") in accordance with the indenture governing TNMP's FMBs. On October 16, 1995, the Trustee paid the proceeds to the holders of the FMBs that were redeemed. After receiving notice of the redemption, PPM America, Inc. ("PPM"), representing certain bondholders, contacted TNMP questioning the appropriateness of the redemption and threatening to take legal action against TNMP. On September 28, 1995, TNMP filed a lawsuit against PPM and Bank of America-Illinois in Texas state court. On PPM's motion, the lawsuit was removed to the United States District Court, Northern District of Texas, Fort Worth Division (No. 495-CV-738-A). In general, TNMP seeks a declaratory judgment that redemption of $29.2 million of its Series T FMBs with proceeds from the sale of its Panhandle properties is proper under the indenture governing its FMBs. PPM filed a counterclaim in the lawsuit. In its counterclaim, PPM seeks a declaration that TNMP cannot partially redeem the Series T FMBs and that TNMP's partial redemption breached indenture provisions governing the Series T FMB's. PPM also claims that TNMP violated the Texas Securities Act, and is seeking alleged actual and punitive damages of approximately $6.0 million. PPM has requested certification of the proceeding as a class action. Management believes that PPM's claims are without merit and is vigorously contesting the claims. In the opinion of management, the ultimate disposition of this matter will not have a material adverse effect on TNPE's and TNMP's consolidated financial position or results of operations. As of September 30, 1995, cash and cash equivalents included the $29.2 million received from SPS (restricted for redemption of FMBs), and the related $29.2 million for Series T FMBs has been presented as a current liability in the accompanying interim consolidated balance sheets. (2) Change in Accounting for Unbilled Revenues Effective January 1, 1995, TNMP changed its method of accounting for operating revenues from cycle billing to full accrual. This change resulted in the recognition of $12,993,000 of additional revenues ($8,445,000, net of taxes). Accruing unbilled revenues more closely matches revenues and expenses and more closely conforms to common utility industry practice. Unbilled revenues represent the estimated amount customers will be charged for service received, but not yet billed, as of the end of each month. Previously these revenues were recognized as operating revenues in the following month. (3) Revenues Subject to Refund During the third quarter of 1995, the Internal Revenue Service ("IRS") issued TNMP a favorable private letter ruling that enabled TNMP to recognize additional revenues and accrued interest of $4.9 million that previously had been deferred. This resulted in a one-time after- tax earnings increase of $3.0 million, or $0.28 per share. The Public Utility Commission of Texas ("PUCT") ordered TNMP to seek the private letter ruling from the IRS concerning the regulatory tax treatment of disallowed utility plant costs as discussed in TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K on page 51. Page 9 (4) Income Taxes The components of income taxes were as follows: Three Months Ended September 30, TNPE TNMP 1995 1994 1995 1994 (In Thousands) Taxes included in net operating income: Federal - current $ 915 $2,396 $915 $2,396 State - current 541 80 541 80 Federal - deferred 5,993 2,023 5,993 2,023 Investment tax credits ("ITC") 2,398 499 2,398 499 9,847 4,998 9,847 4,998 Taxes included in other income: Federal - current 7,506 786 7,519 320 Federal - deferred (2,183) 48 (2,170) - ITC (24) (47) (20) - 5,299 787 5,329 320 Total income taxes $15,146 $5,785 $15,176 $ 5,318
Nine Months Ended September 30, TNPE TNMP 1995 1994 1995 1994 (In Thousands) Taxes included in net operating income: Federal - current $2,944 $1,052 $2,944 $1,052 State - current 541 136 541 136 Federal - deferred 5,772 1,795 5,772 1,795 ITC 2,291 (428) 2,291 (428) 11,548 2,555 11,548 2,555 Taxes included in other income : Federal - current 7,359 893 7,382 460 Federal - deferred (1,634) (11,025) (1,769) (11,041) ITC (28) (57) (20) - 5,697 (10,189) 5,593 (10,581) Taxes on cumulative effect of change in accounting, federal - deferred (note 2) 4,548 - 4,548 - Total income taxes $21,793 $(7,634) $21,689 $(8,026)
The following summarizes federal tax carryforwards as of September 30, 1995: TNPE TNMP (In Thousands) Net operating loss Amount $11,868 $27,257 First year of expiration period 2009 2008 Last year of expiration period 2009 2009 Minimum tax credits Amount $22,441 $27,379 Expiration period none none ITC Amount $14,381 $15,576 Expiration period 2005 2005
As indicated in the 1994 Combined Annual Report on Form 10-K on page 50, an IRS revenue agent involved in auditing TNPE's 1990 and 1991 consolidated federal income tax returns recommended, in March 1995, that a private letter ruling concerning the TNP One generating plant's eligibility for ITC be revoked retroactively. Management believes that TNMP's claim for ITC is valid and is contesting the agent's recommendation. Of the $22.5 million of ITC at issue, TNPE and its subsidiaries have utilized $5.2 million in the consolidated returns through 1994; TNMP's portion is $4.0 million. However, TNPE and TNMP have only recognized a cumulative of $0.9 million of the ITC in results of operations since 1990. Page 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with the related consolidated financial statements and notes. References to "note(s)" will mean Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS Overall Results TNPE's earnings applicable to common stock were $26.6 million for the third quarter of 1995 ("current quarter") as compared to $11.7 million for the third quarter of 1994 ("prior quarter"). Exclusive of one-time items and the change in unbilled revenues, earnings for the current quarter were $16.2 million, an improvement of $4.5 million over the prior quarter. The $4.5 million improvement resulted primarily from higher base revenues, increased GWH sales, and cost containment. Two one-time items also contributed to the improvement in current quarter earnings. First, TNMP completed the sale of its Texas Panhandle properties to SPS and recognized a net of tax gain of $9.5 million as described in note 1. Second, TNMP recognized a net of tax increase of $3.0 million from previously deferred revenues after receiving a favorable IRS private letter ruling as described in note 3. In addition, the change in unbilled revenues as described in note 2 decreased current quarter earnings by $2.1 million. For the nine-month period ended September 30, 1995 ("current nine- month period"), TNPE's earnings applicable to common stock were $38.5 million as compared to the loss applicable to common stock of $13.2 million for the same period ended September 30, 1994 ("prior nine-month period"). Exclusive of one-time items in both nine-month periods and the change in unbilled revenues, current nine-month period earnings were $17.6 million as compared to $7.3 million for the prior nine-month period. The $10.3 million improvement resulted primarily from higher base revenues and cost containment. Three one-time items contributed to the improvement in earnings for the current nine-month period: the $9.5 million gain on TNMP's sale of its Panhandle properties as described in note 1, recognition of the net increase from previously deferred revenues of $3.0 million as described in note 3, and the cumulative effect of change in accounting for unbilled revenues of $8.4 million as described in note 2. For the prior nine-month period, earnings decreased by $20.5 million for the one-time 1994 recognition of regulatory disallowances. The sale of the Panhandle properties is not expected to materially affect future results of operations. Since the operations of TNMP (the principal subsidiary) represent virtually all of TNPE's operations, the following discussion focuses primarily on TNMP's operations. Operating Revenues
The components of operating revenues are summarized in the following table (in thousands): Three Months Ended Sept. 30, Nine Months Ended Sept. 30, Increase Increase 1995 1994 (Decrease) 1995 1994 (Decrease) Total operating revenues $151,586 149,864 1,722 378,470 368,509 9,961 Effect of change in unbilled revenues 3,220 - 3,220 (604) - (604) Effect of recognizing deferred revenue from private letter ruling (4,128) - (4,128) (4,128) - (4,128) Subtotal 150,678 149,864 814 373,738 368,509 5,229 Less pass-through items: Power purchased for resale 52,060 59,788 (7,728) 138,715 151,790 (13,075) Fuel 14,744 13,400 1,344 34,972 32,497 2,475 Standby power 1,346 1,294 52 4,376 4,709 (333) Total pass-through items 68,150 74,482 (6,332) 178,063 188,996 (10,933) Base revenues-billed $82,528 $75,382 $7,146 $195,675 $179,513 $ 16,162
The change in accounting for unbilled revenues was applied retroactively to January 1, 1995. Unbilled revenues for the current quarter decreased by $3.2 million and increased by $0.6 million for the current nine-month period. The change in accounting is not expected to materially affect total annual revenues as compared to the prior fiscal year. However, revenues in particular months are expected to fluctuate as compared to the same months in the prior year due to the seasonal variation in sales. Page 11 The recognition of previously deferred revenues as described at note 3 increased operating revenues by $4.1 million. Pass-through items are the portion of operating revenues that recover from customers the costs of power purchased for resale, fuel, and standby power. These items affect customer rates but do not affect operating income. Explanations for the quarterly and nine-month period variances are discussed under "Results of Operations -- Operating Expenses." Excluding the effect of the change in accounting, recognition of deferred revenue, and pass-through items, current quarter and nine-month period base revenues exceeded the corresponding periods last year by $7.1 million and $16.2 million, respectively. The base revenue increases are primarily due to rate increases in both Texas ($17.5 million annualized) and New Mexico ($0.4 million annualized). These rate increases resulted from settlement agreements in October 1994 and May 1994, respectively. Increased sales also contributed to the base revenue increases. Current quarter sales of 2,023 GWH represented a 3.8% improvement over prior quarter sales and contributed $2.7 million to the increase in base revenues. The increase in sales resulted from increased consumption by all customer classes, and is attributed to warmer weather and customer growth. The increases for each customer class are residential (4.7%), commercial (4.0%), and industrial (3.1%). Excluding the reduction in customers from the sale of the Texas Panhandle properties (note 1), total customers increased by 2.3%. Current nine-month period sales of 5,063 GWH represented a 2.1% improvement over prior nine-month period sales and contributed $3.5 million to the increase in base revenues. The increase in sales resulted from the increase in total customers (as described above) and more consumption by residential (2.9%) and commercial (4.4%) customers. Operating Expenses Current quarter operating expenses decreased by $2.4 million as compared to the prior quarter. The decrease is primarily due to lower pass-through expenses of $6.3 million and other operating expenses of $0.9 million offset by increased income tax expense of $4.8 million. Current nine-month period operating expenses decreased by $3.0 million as compared to the prior nine-month period. The decrease is primarily due to decreased pass-through expenses of $10.9 million and other operating expenses of $1.1 million offset by increased income tax expense of $9.0 million. Pass-through Expenses. Pass-through expenses consist of power purchased for resale, fuel, and standby power. The overall decreases are primarily due to lower costs of power purchased for resale offset by increased fuel expense. Power purchased for resale in the current quarter and current nine-month period decreased $7.7 million and $13.1 million, respectively, as compared to the corresponding periods last year. In Texas, the reduction in the cost of power purchased for resale was achieved by shifting purchases to lower cost suppliers for supplemental summer peaking capacity. This arrangement became effective May 1, 1995, and is expected to result in cost savings of $7.0 million annually. Also, TNMP actively intervened in a Texas rate case of a major supplier and is benefiting with cost savings of $10.5 million annually. In New Mexico, TNMP exercised rights under its purchased power contracts applicable to its New Mexico customers to shift purchases to lower cost suppliers. TNMP's customers directly benefit from these cost reductions as these expenses are recovered through adjustment clauses. Increases in fuel expense in the current quarter and current nine- month period were $1.3 million and $2.5 million, respectively, and are directly related to an increased fixed fuel recovery factor approved by the Public Utility Commission of Texas ("PUCT") in connection with the 1994 Texas rate case settlement. The majority of TNMP's fuel expense is equal to the amount recovered in revenues and any difference from actual costs is deferred until a new factor is established under a fuel factor reconciliation hearing. The current fixed fuel factor was established to recover current expense as well as the under recovered fuel amounting to $15.3 million at December 31, 1994. The under recovered amount at September 30, 1995 was $9.3 million. Also, contributing to the recovery of under recovered fuel is the 20% reduction in the cost of lignite coal as discussed in TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K on page 21. In management's opinion, the current fixed fuel factor along with the fuel cost reduction should enable the recovery of under-recovered fuel costs by the second half of 1996. Once the under recovery is eliminated, TNMP plans to request a revised fuel factor from the PUCT, enabling cost savings to be passed on to customers. Other Operating Expenses. The overall decreases in other operating expenses in the current quarter and current nine-month period are primarily due to direct payroll expense decreases of $0.7 million and $2.2 million, respectively, as a result of the 1994 reorganization. Increases in certain employee benefits and customer collection costs partially offset the payroll decreases. Income Taxes. The current quarter and current nine-month period income tax expense increases are due to improved operating results, the gain from the Panhandle properties sale, and the recognition of the previously deferred revenues. Page 12 FINANCIAL CONDITION Liquidity As of September 30, 1995, available unused credit under the Unit 2 Credit Agreement was $98.5 million (total commitment is $147.75 million), subject to interest coverage and equity ratio tests. This compares to available unused credit of $62.5 million as of December 31, 1994. The $36.0 million increase in available credit is attributed to improved cash flow from operations as explained in "Results of Operations." TNMP entered into a new credit facility (the "New Credit Agreement") effective November 3, 1995. The New Credit Agreement provides for a total commitment of $150 million and replaced the borrowings under the Unit 2 Credit Agreement. The interest rate margins under the New Credit Agreement are initially 0.875% lower than those under the Unit 2 Credit Agreement. In addition, interest rate margins under the previous Unit 2 Credit Agreement were scheduled to automatically increase each year while those under the New Credit Agreement will decrease as the ratings on TNMP's FMBs improve. Collateral securing the New Credit Agreement is generally a first lien on a portion of TNP One, a second lien on TNMP's first mortgage bond trust estate located in Texas, and a pledge of $30 million of FMBs. Although the total commitment is for $150 million, TNMP may initially borrow only $100 million. To borrow amounts above $100 million, TNMP must pledge additional FMBs, in an amount equal to any borrowings in excess of $100 million, to the New Credit Agreement banks. Therefore, to borrow the full $150 million commitment, TNMP must pledge a total of $80 million of FMBs. These FMBs are or will be issued for collateral purposes only and will not bear interest except in the event of a default. The New Credit Agreement will not only result in lower interest rates, but also will provide TNMP with additional financing flexibility. The Unit 2 Credit Agreement commitment was scheduled to reduce by approximately $36.9 million each year beginning on December 31, 1995. The New Credit Agreement commitment will reduce to $125 million on November 3, 1998 and to $100 million on November 3, 1999, and will expire on November 3, 2000. TNMP also has the ability to draw on the New Credit Agreement to redeem other outstanding debt. TNMP believes that cash flow from operations and periodic borrowings under the New Credit Agreement will be sufficient to meet working capital requirements and planned capital expenditures at least through December 1996. TNMP has sufficient liquidity to satisfy the possibility of adverse rulings, if any, for the contingencies described in notes 1 and 4. Common Stock Dividend On November 7, 1995, TNPE announced an increase in the quarterly dividend from $0.20 to $0.22 per share. This will be effective with the quarterly dividends to be paid on December 15, 1995. At September 30, 1995, the amounts available to support TNPE's dividend consist of TNPE's unconsolidated cash and investments of approximately $6.4 million and TNMP's unrestricted retained earnings of $34.6 million that are available for cash dividends to TNPE. Page 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The information set forth in note 1 of Notes to Consolidated Financial Statements regarding legal matters is incorporated in this Item 1 by reference. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The Exhibit Index on pages 56 to 67 of TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K and the exhibits listed in that Exhibit Index are incorporated in this report by reference. A copy of the referenced Exhibit Index is filed as Exhibit 99(a) to this report. The following exhibits are incorporated by reference to the exhibits with the same exhibit number designation in TNPE's and TNMP's original Form 10-Q for the quarter ended March 31, 1995: *10(vv) TNP Enterprises, Inc. Equity Incentive Plan (incorporated by reference to Exhibit 4(i) of TNPE's registration statement on Form S-8 filed with the SEC on April 28, 1995, File No. 33-58897) *10(ww) TNP Enterprises, Inc. Nonemployee Director Stock Plan (incorporated by reference to Exhibit 4(j) of TNPE's registration statement on Form S-8 filed with the SEC on April 28, 1995, File No. 33-58897) *10(xx) TNP Enterprises, Inc. Management Short-Term Incentive Plan *10(yy) TNP Enterprises, Inc. Broad-Based Short-Term Incentive Plan *10(zz) TNMP Excess Benefit Plan, as amended The following exhibits are filed with this report: 27(a) Financial Data Schedule for TNPE 27(b) Financial Data Schedule for TNMP 99(a) Exhibit Index (incorporated by reference to pages 56 to 67 of TNPE's and TNMP's 1994 Combined Annual Report on Form 10-K) * Management contracts. (b) Reports on Form 8-K None. Page 14 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. (Registrant) TNP ENTERPRISES, INC. By \s\ Manjit S. Cheema Manjit S. Cheema Date: November 14, 1995 Vice President & Chief Financial Officer (Registrant) TEXAS-NEW MEXICO POWER COMPANY By \s\ Melissa D. Davis Melissa D. Davis Date: November 14, 1995 Controller and as Chief Accounting Officer Page 15 EX-27 2
UT 0000741612 TNP ENTERPRISES, INC. 1000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 944,636 1,159 87,439 46,639 0 1,079,873 134,860 0 82,677 217,537 3,800 3,780 616,588 0 0 0 31,870 0 0 0 206,298 1,079,873 378,470 11,548 289,631 301,179 77,291 9,983 87,274 56,736 38,983 520 38,463 6,537 54,227 65,858 3.53 3.53
EX-27 3
UT 0000022767 TEXAS-NEW MEXICO POWER COMPANY 1000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 944,636 175 80,989 48,471 0 1,074,271 107 175,111 49,281 224,499 3,800 3,780 616,588 0 0 0 31,870 0 0 0 193,734 1,074,271 378,470 11,548 289,631 301,179 77,291 10,242 87,533 56,736 39,242 520 38,722 0 54,227 65,856 0 0
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