-----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, NtwsnV1Bm8wg/flF5mFMCABqRHe1Qei9rTSFRfu5MdG8FUcr8W7BS0J2JMp6AGZW p0TlkLgDRuMlzWDdiVUSbw== 0000741612-97-000019.txt : 19970507 0000741612-97-000019.hdr.sgml : 19970507 ACCESSION NUMBER: 0000741612-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970506 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TNP ENTERPRISES INC CENTRAL INDEX KEY: 0000741612 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [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: 97596086 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: ELECTRIC SERVICES [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: 97596087 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 UNITED STATES 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 March 31, 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 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 13,061,689 shares of common stock outstanding as of April 28, 1997. - -------------------------------------------------------------------------------- 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 \ \ TNP Enterprises, Inc. holds all 10,705 outstanding common shares of Texas-New Mexico Power Company. TNP Enterprises, Inc. And Subsidiaries Texas New-Mexico Power Company And Subsidiaries Combined Quarterly Report on Form 10-Q for the period ended March 31, 1997 This Combined Quarterly Report on Form 10-Q is filed separately 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 March 31, 1997, and 1996) TNP Enterprises, Inc. (TNP) and Subsidiaries: Consolidated Statements of Income Three Month Periods Ended March 31, 1997, and 1996 3 Consolidated Statements of Cash Flows Three Month Periods Ended March 31, 1997, and 1996 4 Consolidated Balance Sheets March 31, 1997, and December 31, 1996 5 Texas-New Mexico Power Company (TNMP) and Subsidiaries: Consolidated Statements of Income Three Month Periods Ended March 31, 1997, and 1996 6 Consolidated Statements of Cash Flows Three Month Periods Ended March 31, 1997, and 1996 7 Consolidated Balance Sheets March 31, 1997, and December 31, 1996 8 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 12 Item 5. Other Information. 13 Item 6. Exhibits and Reports on Form 8-K. 13 (a) Exhibit Index 13 (b) Reports on Form 8-K 13 Signature page 14
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, -------------------------------------------- 1997 1996 --------------------- -------------------- (In thousands except per share amounts) OPERATING REVENUES $ 128,397 $ 99,827 --------------------- -------------------- OPERATING EXPENSES: Purchased power 58,347 32,635 Fuel 9,969 11,055 Other operating and general expenses 19,609 17,950 Maintenance 3,012 2,737 Depreciation 9,665 9,695 Taxes other than income taxes 7,994 7,351 Income taxes 1,378 618 --------------------- -------------------- Total operating expenses 109,974 82,041 --------------------- -------------------- NET OPERATING INCOME 18,423 17,786 --------------------- -------------------- OTHER INCOME: Other income and deductions, net 199 208 Income taxes (1) (85) --------------------- -------------------- Other income, net of taxes 198 123 --------------------- -------------------- INCOME BEFORE INTEREST CHARGES 18,621 17,909 --------------------- -------------------- INTEREST CHARGES: Interest on long-term debt 13,506 16,569 Other interest and amortization of debt-related costs 1,005 778 --------------------- -------------------- Total interest charges 14,511 17,347 --------------------- -------------------- NET INCOME 4,110 562 Dividends on preferred stock 40 42 --------------------- -------------------- INCOME APPLICABLE TO COMMON STOCK $ 4,070 $ 520 ===================== ==================== EARNINGS PER SHARE OF COMMON STOCK $ 0.31 $ 0.05 ===================== ==================== DIVIDENDS PER SHARE OF COMMON STOCK $ 0.245 $ 0.22 ===================== ==================== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 13,141 10,986 ===================== ==================== The accompanying notes are an integral part of these consolidated financial statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ------------------------------------------ 1997 1996 ------------------ -------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 130,089 $ 100,052 Purchased power (55,719) (39,758) Fuel costs paid (9,503) (10,998) Cash paid for payroll and to other suppliers (33,494) (25,302) Interest paid, net of amounts capitalized (20,828) (25,407) Income taxes paid 874 (8,386) Other taxes paid, net of amounts capitalized (16,110) (16,845) Other operating cash receipts and payments, net 882 1,636 ------------------ -------------------- NET CASH USED IN OPERATING ACTIVITIES (3,809) (25,008) ------------------ -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (5,818) (6,460) Additions to other property and nonregulated investments (2,806) - ------------------ -------------------- NET CASH USED IN INVESTING ACTIVITIES (8,624) (6,460) ------------------ -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (3,238) (2,453) Borrowings (repayments) under revolving credit facilities 120,000 30,000 Common stock issuances 1,678 934 Redemptions: Other long-term debt (19) - First mortgage bonds (100,800) (120) ----------------- ------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 17,621 28,361 ----------------- ------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 5,188 (3,107) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,387 21,105 ----------------- ------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,575 $ 17,998 ================= =================== RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES: Net income $ 4,110 $ 562 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 9,665 9,695 Amortization of debt-related costs and other deferred charges 967 1,122 Allowance for borrowed funds used during construction (13) (39) Deferred income taxes (excluding effect of change in accounting) 290 901 Investment tax credits 241 (267) Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs 2,072 (5,688) Accrued interest (7,271) (7,252) Accrued taxes (6,394) (17,780) Accounts payable (4,101) (4,854) Changes in other current assets and liabilities (5,621) (1,045) Other, net 2,246 (363) ----------------- ------------------- NET CASH USED IN OPERATING ACTIVITIES $ (3,809) $ (25,008) ================= =================== The accompanying notes are an integral part of these consolidated financial statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 December 31, (Unaudited) 1996 --------------- ---------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,219,419 $ 1,215,355 Construction work in progress 819 906 --------------- ---------------- Total 1,220,238 1,216,261 Less accumulated depreciation 290,078 282,322 --------------- ---------------- Net utility plant 930,160 933,939 --------------- ---------------- OTHER PROPERTY AND INVESTMENTS, at cost 6,678 3,927 --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents 13,575 8,387 Customer receivables 14,846 16,362 Inventories, at lower of average cost or market: Fuel 534 367 Materials and supplies 6,079 6,384 Deferred purchased power and fuel costs 3,766 3,565 Accumulated deferred income taxes 4,730 1,937 Other current assets 1,432 1,121 --------------- ---------------- Total current assets 44,962 38,123 --------------- ---------------- DEFERRED CHARGES 31,050 30,795 --------------- ---------------- $ 1,012,850 $ 1,006,784 =============== ================ CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholders' equity: Common stock - no par value per share. Authorized 50,000,000 shares; issued 13,053,102 shares in 1997 and 13,006,492 in 1996 $ 185,449 $ 183,771 Retained earnings 95,575 94,703 --------------- ---------------- Total common shareholders' equity 281,024 278,474 Preferred stock 3,420 3,420 Long-term debt, less current maturities 553,145 533,964 --------------- ---------------- Total capitalization 837,589 815,858 --------------- ---------------- CURRENT LIABILITIES: Current maturities of long-term debt 138 138 Accounts payable 24,345 28,446 Accrued interest 3,608 10,879 Accrued taxes 12,439 18,833 Customers' deposits 2,838 2,662 Deferred purchased power costs 2,273 - Other current liabilities 7,450 11,797 --------------- ---------------- Total current liabilities 53,091 72,755 --------------- ---------------- REGULATORY TAX LIABILITIES 10,462 10,963 ACCUMULATED DEFERRED INCOME TAXES 78,428 74,844 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 19,974 19,734 DEFERRED CREDITS 13,306 12,630 COMMITMENTS AND CONTINGENCIES (Notes 2 and 4) --------------- ---------------- $ 1,012,850 $ 1,006,784 =============== ================ The accompanying notes are an integral part of these consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, ------------------------------------ 1997 1996 ----------------- ----------------- (In thousands) OPERATING REVENUES $ 126,223 $ 99,827 ----------------- ----------------- OPERATING EXPENSES: Purchased power 58,347 32,635 Fuel 9,969 11,055 Other operating and general expenses 15,758 17,950 Maintenance 3,012 2,737 Depreciation of utility plant 9,610 9,695 Taxes other than income taxes 7,795 7,351 Income taxes 2,065 618 ----------------- ----------------- Total operating expenses 106,556 82,041 ----------------- ----------------- NET OPERATING INCOME 19,667 17,786 ----------------- ----------------- OTHER INCOME: Other income and deductions, net 159 296 Income taxes (1) (116) ----------------- ----------------- Other income, net of taxes 158 180 ----------------- ----------------- INCOME BEFORE INTEREST CHARGES 19,825 17,966 ----------------- ----------------- INTEREST CHARGES: Interest on long-term debt 13,506 16,569 Other interest and amortization of debt-related costs 1,005 778 ----------------- ----------------- Total interest charges 14,511 17,347 ----------------- ----------------- NET INCOME 5,314 619 Dividends on preferred stock 40 42 ----------------- ----------------- INCOME APPLICABLE TO COMMON STOCK $ 5,274 $ 577 ================= ================= The accompanying notes are an integral part of these consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ------------------------------------ 1997 1996 ------------------ --------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 129,737 $ 100,052 Purchased power (55,719) (39,758) Fuel costs paid (9,503) (10,998) Cash paid for payroll and to other suppliers (27,548) (25,138) Interest paid, net of amounts capitalized (20,828) (25,407) Income taxes paid 3 (8,499) Other taxes paid, net of amounts capitalized (16,852) (16,845) Other operating cash receipts and payments, net 846 1,723 ------------------ --------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 136 (24,870) ------------------ --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (5,818) (6,460) Additions to other property and investments - - ------------------ --------------- CASH FLOWS USED IN INVESTING ACTIVITIES (5,818) (6,460) ------------------ --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (9,040) (2,442) Borrowings (repayments) under revolving credit facilities 120,000 30,000 First mortgage bond redemption (100,800) (120) ------------------ --------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 10,160 27,438 ------------------ --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 4,478 (3,892) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,115 14,450 ------------------ --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,593 $ 10,558 ================== =============== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $ 5,314 $ 619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of utility plant 9,610 9,695 Amortization of debt-related costs and other deferred charges 967 1,122 Allowance for borrowed funds used during construction (13) (39) Deferred income taxes (467) 884 Investment tax credits 334 (262) Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs 2,072 (5,688) Accounts payable (4,819) (4,854) Accrued interest (7,271) (7,252) Accrued taxes (6,855) (17,878) Changes in other current assets and liabilities (1,500) (882) Other, net 2,764 (335) ------------------ --------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 136 $ (24,870) ================== =============== The accompanying notes are an integral part of these consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED BALANCE SHEETS March 31, 1997 December 31, (Unaudited) 1996 -------------- --------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,219,419 $ 1,215,355 Construction work in progress 819 906 -------------- --------------- Total 1,220,238 1,216,261 Less accumulated depreciation 290,078 282,322 -------------- --------------- Net utility plant 930,160 933,939 -------------- --------------- OTHER PROPERTY AND INVESTMENTS, at cost 1,884 1,884 -------------- --------------- CURRENT ASSETS: Cash and cash equivalents 9,593 5,115 Customer receivables 12,183 15,521 Inventories, at lower of average cost or market: Fuel 534 367 Materials and supplies 6,079 6,384 Deferred purchased power and fuel costs 3,766 3,565 Accumulated deferred income taxes 4,730 1,937 Other current assets 921 1,324 -------------- --------------- Total current assets 37,806 34,213 -------------- --------------- DEFERRED CHARGES 30,935 32,121 -------------- --------------- $ 1,000,785 $ 1,002,157 ============== =============== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholder'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 222,133 222,133 Retained earnings 61,582 65,308 -------------- --------------- Total common shareholder's equity 283,822 287,548 Redeemable cumulative preferred stock 3,420 3,420 Long-term debt, less current maturities 553,000 533,800 -------------- --------------- Total capitalization 840,242 824,768 -------------- --------------- CURRENT LIABILITIES: Current maturities of long-term debt 100 100 Accounts payable 22,435 27,254 Accrued interest 3,608 10,879 Accrued taxes 10,046 16,901 Customers' deposits 2,838 2,662 Deferred purchased power costs 2,273 - Other current liabilities 7,287 10,993 -------------- --------------- Total current liabilities 48,587 68,789 -------------- --------------- REGULATORY TAX LIABILITIES 10,462 10,963 ACCUMULATED DEFERRED INCOME TAXES 68,689 65,860 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 19,499 19,164 DEFERRED CREDITS 13,306 12,613 COMMITMENTS AND CONTINGENCIES (Notes 2 and 4) -------------- --------------- $ 1,000,785 $ 1,002,157 ============== =============== The accompanying notes are an integral part of these consolidated financial statements.
TNP Enterprises Inc. and Subsidiaries Texas-New Mexico Power Company and Subsidiaries Notes to Consolidated Financial Statements Note 1. Interim Financial Statements The interim consolidated financial statements of TNP and subsidiaries, and TNMP and subsidiaries are unaudited, and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the 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. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in TNP's and TNMP's 1996 Combined Annual Report on Form 10-K. Note 2. Income Taxes As indicated in the 1996 Combined Annual Report on Form 10-K, an Internal Revenue Service revenue agent involved in auditing TNP's 1990 and 1991 consolidated federal income tax returns recommended, in March 1995, that a private letter ruling concerning eligibility of the TNP One generating plant for investment tax credit (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, TNP and its subsidiaries have utilized $8.2 million in the consolidated returns through 1995 and expect to utilize $1.6 million in the 1996 consolidated tax returns. TNMP's portion is $7.0 million and $1.8 million respectively. However, since 1990, TNP and TNMP have only recognized $2.3 million of the amortization of ITC in results of operations. Note 3. Regulatory Matters Cities Rate Review Beginning in late December 1996, certain cities in the Texas gulf coast area served by TNMP passed resolutions requiring TNMP to file complete rate information with those cities. During the first quarter of 1997 those cities agreed to reopen negotiations on a new transition to competition proposal and have deferred the required rate filing until July 1, 1997. If negotiations on the new transition to competition proposal are not successful and the rate filings are made, TNMP does not anticipate a final resolution of the rate review with the cities before late 1997. Based on its preliminary analysis, TNMP believes the filing will support the reasonableness of TNMP's current rates. Texas Transmission Access During 1996, the Public Utility Commission of Texas (PUCT) passed a wholesale transmission access rule which established a regional method of transmission pricing, terms, and conditions. The purpose is to increase competition in wholesale energy sales within Texas and establish an Independent System Operator for the Electric Reliability Council of Texas transmission system. TNMP believes it will benefit from the new rules as competition should increase in the wholesale power market and result in reduced purchased power and wheeling costs. The new transmission fee structure was scheduled to start in early 1997. However, during the first quarter of 1997 several Texas utilities unsuccessfully petitioned the PUCT to revise the new transmission rules, and an appeal has been filed in a state district court. Until the new transmission rules are recognized as being final, TNMP has not recorded the benefits of the new transmission rules. Note 4. Accounting for the Effects of Regulation TNP's and TNMP's consolidated financial statements reflect the application of certain accounting standards, including Statement of Financial Accounting Standard (SFAS) 71, "Accounting for the Effects of Certain Types of Regulation," which provide for recognition of the economic effects of rate regulation. On April 18, 1997, the New Mexico Public Utility Commission (NMPUC) issued an order approving TNMP's plan for transition to competition in New Mexico. During the first quarter of 1997, TNMP proposed a new plan for transition to competition to the communities within TNMP's service territory in Texas. Additional information regarding these two transition plans is provided under "MD&A--Regulatory Matters." Continued applicability of SFAS 71 to TNP's and TNMP's financial statements requires that rates set by an independent regulator on a cost-of-service basis can actually be charged to and collected from customers. Management believes that as of March 31, 1997, and for the foreseeable future, TNP and TNMP satisfy the criteria for accounting in accordance with SFAS 71. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). The following discussion should be read in conjunction with the related interim consolidated financial statements and notes. Results Of Operations Overall Results TNP's earnings applicable to common stock were $4.1 million for the quarter ended March 31, 1997. Earnings increased $3.6 million when compared to the corresponding 1996 quarter, primarily due to a reduction in interest expense, control area savings, and additional base revenue from industrial and commercial sales at TNMP. Facility Works Inc. (Facility Works), a wholly owned subsidiary of TNP, began operations in early 1996, and provides energy-related services and products to commercial and institutional customers. For the quarter ended March 31, 1997, Facility Works had a net loss of $1.0 million on revenues of $2.2 million. Facility Works had no net income or loss in the first quarter of 1996. Since the operations of TNMP (the principal subsidiary) currently represent most of TNP's operations, the following discussion focuses on TNMP's operations unless noted otherwise. Operating Revenues TNMP's operating revenues increased $26.4 million as compared to the corresponding 1996 quarter. Current quarter base revenues increased $3.3 million, or 5.9%, compared to the corresponding 1996 period. Base revenues increased due to the additional economy rate sales and higher commercial sales discussed below. The components of TNMP's operating revenues are summarized in the following table (in thousands): Three Months Ended March 31, Increase 1997 1996 (Decrease) --------- ---------- ---------- Operating revenues $ 126,223 $ 99,827 $ 26,396 Less pass-through items 67,542 44,406 23,136 --------- ---------- --------- Base revenues $ 58,681 $ 55,421 $ 3,260 ========= ========== ========= Base revenues Weather related $ (572) Price - sales mix and other 397 Customer growth 851 Industrial - economy rate sales 1,961 Industrial - firm rate sales (278) Standby revenues - nonindustrial 818 Other electric revenue 83 --------- $ 3,260 ========= Pass-through items are the portion of operating revenues that recover the costs of purchased power, fuel, and standby power from customers. These items affect customer rates but do not affect operating income. Explanations for the first quarter variance are discussed under "Results of Operations -- Operating Expenses." Current quarter GWH sales increased by 663 GWH, or 41.6%. The increase was attributed primarily to economy rate sales which are low margin, high volume, and generally short-term. The majority of the increase in economy rate sales was due to contractual agreements entered into with two existing cogeneration customers in mid-1996. The components of gigawatt-hours (GWH) sales are summarized in the following table: Three Months Ended March 31, --------------------------- Increase 1997 1996 (Decrease) ---- ---- ---------- GWH sales: Residential 494 498 (4) Commercial 380 370 10 Industrial: Firm 267 326 (59) Economy 1,061 374 687 Other 55 26 29 -------- --------- -------- Total GWH sales 2,257 1,594 663 ======== ========= ======== Current quarter sales of 2,257 GWH's, increased over the corresponding 1996 quarter sales of 1,594 GWH's due to increased industrial economy sales. Contributing to the 89.8% industrial sales increase were contractual agreements entered into with two existing cogeneration customers in mid-1996. Operating Expenses Total operating expenses for the current quarter increased by $24.5 million as compared to the same quarter last year primarily due to an increase in pass-through expenses. The components of TNMP's operating expenses are summarized in the following table (in thousands): Three Months Ended March 31, --------------------------- Increase 1997 1996 (Decrease) ---- ---- ---------- Pass-through expenses: Purchased power $ 58,347 $ 32,635 $ 25,712 Standby power - 1,555 (1,555) Fuel 9,195 10,216 (1,021) -------- -------- --------- Total pass-through items 67,542 44,406 23,136 Other operating expenses 29,154 29,666 (512) Income and other tax expenses 9,860 7,969 1,891 -------- -------- --------- Operating expenses $106,556 $ 82,041 $ 24,515 ======== ======== ========= Pass-through Expenses Pass-through expenses consist of purchased power, standby power, and certain fuel costs. Current quarter pass-through expenses increased due to higher purchased power costs. Purchased Power. Purchased power costs, including standby, increased by $24.2 million in the current quarter due primarily to increased power requirements to meet higher GWH sales. The first quarter of 1996 was reduced by supplier refunds of $6.7 million which were passed through to Texas customers. Fuel. The decrease in the current quarter of $1.0 million is attributed to a reduction in firm rate industrial sales. Fuel cost recovery is excluded from economy rate sales. The majority of TNMP's monthly fuel costs are recovered in revenues through a fixed fuel factor per KWH approved by the PUCT. TNMP records as fuel expense the amount collected through this fixed fuel factor. Any difference between the amount collected and actual cost is deferred for collection/refund in future periods. Other Operating Expenses, Income and Other Tax Expenses Other operating expenses for the current quarter were approximately the same as the prior year quarter. Current quarter income and other tax expenses increased by $1.9 million. The increases are due to higher pre-tax income and additional gross receipts taxes. Interest Expense Interest charges decreased by $2.8 million. The decrease is attributed to reduced long-term debt levels and refinancing of debt. Borrowings under the revolving credit facilities and an equity contribution from TNP in late 1996, resulting from a common stock sale, were used to redeem TNMP's higher interest rate bonds. Financial Condition Liquidity Currently, the main sources of liquidity for TNMP are cash flow from operations and borrowings from credit facilities. TNMP's cash flow from operations improved for the three months ended March 31, 1997 compared to the three months ended March 31, 1996, due to higher receipts from customers, lower interest expense, and the timing of income tax payments. As discussed above, during the first quarter of 1996, TNMP refunded $6.7 million to customers. TNP's consolidated cash flow from operations also improved for the three months ended March 31, 1997 compared to the three months ended March 31, 1996, for the same reasons as discussed above; however, they were offset slightly by $3.1 million of cash used by Facility Works in its operations. Currently TNP's primary source of cash are dividends from TNMP. TNMP has two credit facilities with a total commitment of $250 million - - the 1995 Facility ($150 million) and the 1996 Facility ($100 million). As of March 31, 1997, available unused credit under the 1995 Facility was $75 million, subject to interest coverage and capitalization tests. Under the 1995 Facility, TNMP can borrow up to $25 million of the unused commitment with no additional collateral and borrow the remainder of the unused commitment ($50 million) by pledging first mortgage bonds (FMBs) equal to the principal amount of such borrowings. There is currently no available credit under the $100 million 1996 Facility. The interest rates under both facilities are based on the London Interbank Offered Rate (LIBOR). The interest rate margins on both facilities will decrease as the ratings on TNMP's FMBs improve. In January, TNMP used the credit facilities to retire $100.8 million 11.25% Series T FMBs. TNMP has sufficient liquidity to satisfy the possibility of any known contingencies. Management believes cash flow from operations and periodic borrowings under its two revolving credit facilities should be sufficient to meet working capital requirements and planned capital expenditures at least through 1998. Regulatory Matters Community Choice SM New Mexico. On March 27, 1997, the NMPUC issued an order approving Community Choice, TNMP's plan for transition to competition for its New Mexico service territory as modified by stipulation on February 3. On April 18, 1997, the NMPUC reaffirmed the approval of Community Choice with two minor modifications. A motion had been filed on April 11, 1997, requesting a rehearing on the March 27, 1997 order. The plan went into effect on May 1 and gives TNMP customers the right to choose their energy provider after a three-year transition period. The plan freezes rates (including the recovery of purchased power) for a three-year period, and allows for customer aggregation based on market forces. TNMP believes the plan will allow it to recover most, if not all, of its potential stranded costs in New Mexico; however, the actual recovery of any stranded costs will depend on the future market and price for energy through May 1, 2000. Texas. In late February 1997, TNMP proposed a new plan for transition to competition to the communities within TNMP's service territory in Texas. Due to the numerous issues involved, TNMP can provide no assurance as to the timing or outcome of the new transition to competition plan in Texas. As discussed previously under "Cities Rate Review", certain cities served by TNMP in the Texas gulf coast area and TNMP agreed to delay a rate review filing until July 1, 1997, in order to reopen negotiations on the new transition to competition plan. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Wholesale Purchase Power Agreement. As set forth in TNP's and TNMP's Combined Annual Report on Form 10-K for 1996 filed with the Securities and Exchange Commission, TNMP filed proceedings with the PUCT and in a Texas state district court to declare TNMP's wholesale purchase power agreement (the "TU Agreement") with Texas Utilities Electric Company (TU) null and void. On August 29, 1996, the PUCT entered an order declaring two of the terms of the TU Agreement void, but upheld the validity of the remainder of the contract. In November 1996, TNMP and TU each filed an appeal of the PUCT's ruling with Texas state district courts and such appeals are pending. Early Redemption of Series T FMBs As reported on TNP's and TNMP's 1996 Combined Annual Report on Form 10-K, on January 30, 1997, TNMP, Jackson National Life Insurance Company and John Hancock Life Insurance Company agreed to a tentative settlement of the lawsuit styled Texas-New Mexico Power Company v. John Hancock Life Insurance Co. et. al., then pending in the United States District Court for the Northern District of Texas, Fort Worth Division. The lawsuit arose from TNMP's early retirement of $29.2 million of 11.25% Series T FMBs in late 1995. In an order dated March 31, 1997, the court approved that settlement. In accordance with the settlement, TNMP has paid $2,000,000 to the parties of the lawsuit. The full settlement amount was charged against 1996 income. Cities Rate Review See Note 3 for information regarding the Cities Rate Review. Item 5. Other Information. Dwight R. Spurlock, a director since 1993, retired from TNP's and TNMP's boards of directors as of May 1, 1997. Both companies expect to name a successor later in 1997. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The following exhibits are filed with this report; 27(a) Financial Data Schedule for TNP. 27(b) Financial Data Schedule for TNMP. (b) Reports on Form 8-K TNP and TNMP filed a report on Form 8-K dated February 25, 1997, reporting information under Item 4 regarding a change in Independent Accountants and the satisfactory resolution of a disagreement on accounting. Statement Regarding Forward Looking Information The discussions in this document that are not historical facts, including, but not limited to, the outcome of future rate proceedings, the effect of new transmission rules, the continued application of regulatory accounting principles, future cash flows and the potential recovery of stranded costs, are based upon current expectations. Actual results may differ materially. Among the facts that could cause the results to differ materially from expectations are the following: legislation in the states TNMP serves affecting the regulation of TNMP's business; changes in regulations affecting TNP and TNMP's businesses; results of regulatory proceedings affecting TNP and TNMP's operations; future acquisitions or strategic partnerships; general business and economic conditions; negotiations regarding TNMP's proposal regarding transition to competition; and other factors described from time to time in TNP and TNMP's reports filed with the Securities and Exchange Commission. TNP and TNMP wish to caution readers not to place undue reliance on any such forward looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. TNP ENTERPRISES, INC. AND SUBSIDIARIES TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES 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: May 6, 1997 Vice President and as Chief Financial Officer (Registrant) TEXAS-NEW MEXICO POWER COMPANY By \s\ SCOTT FORBES Scott Forbes Date: May 6, 1997 Controller and as Chief Accounting Officer EX-27 2
UT 0000741612 TNP ENTERPRISES, INC. 1000 3-MOS DEC-31-1996 MAR-31-1997 PER-BOOK 930,160 6,678 44,962 31,050 0 1,012,850 185,449 0 95,575 281,024 0 3,420 553,145 0 0 0 138 0 0 0 175,123 1,012,850 128,397 1,378 108,596 109,974 18,423 198 18,621 14,511 4,110 40 4,070 3,198 13,506 (3,809) .31 .31
EX-27 3
UT 0000022767 TEXAS-NEW MEXICO POWER CO. 1,000 3-MOS DEC-31-1996 MAR-31-1997 PER-BOOK 930,160 1,884 37,806 30,935 0 1,000,785 107 222,133 61,582 283,822 0 3,420 553,000 0 0 0 100 0 0 0 160,443 1,000,785 126,223 2,065 104,491 106,556 19,667 158 19,825 14,511 5,314 40 5,274 9,000 13,506 136 0 0
-----END PRIVACY-ENHANCED MESSAGE-----