-----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, MUS0+1MCzGlWHwQ/XYBCrM0amtDp2tUmRzSklCDxNykBi/QhacFvdFoWbFMTgefq V9tCU0yeurSVlqNCXtaykg== 0000741612-98-000013.txt : 19980505 0000741612-98-000013.hdr.sgml : 19980505 ACCESSION NUMBER: 0000741612-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980504 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: SEC FILE NUMBER: 001-08847 FILM NUMBER: 98609398 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: SEC FILE NUMBER: 002-97230 FILM NUMBER: 98609399 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 (MarkOne) (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, 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 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 13,234,258 shares of common stock outstanding as of April 27, 1998. - -------------------------------------------------------------------------------- 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, 1998 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. TNP Enterprises, Inc. (TNP) and Subsidiaries: Consolidated Statements of Income Three Month Periods Ended March 31, 1998, and 1997 3 Consolidated Statements of Cash Flows Three Month Periods Ended March 31, 1998, and 1997 4 Consolidated Balance Sheets March 31, 1998, and December 31, 1997 5 Texas-New Mexico Power Company (TNMP) and Subsidiaries: Consolidated Statements of Income Three Month Periods Ended March 31, 1998, and 1997 6 Consolidated Statements of Cash Flows Three Month Periods Ended March 31, 1998, and 1997 7 Consolidated Balance Sheets March 31, 1998, and December 31, 1997 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 6. Exhibits and Reports on Form 8-K. 13 (a) Exhibit Index 13 (b) Reports on Form 8-K 13 Signature page 13
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, -------------------------------------- 1998 1997 ----------------- ----------------- (In thousands except per share amounts) OPERATING REVENUES $ 125,399 $ 126,847 ----------------- ----------------- OPERATING EXPENSES: Purchased power 57,510 58,347 Fuel 7,959 9,969 Other operating and maintenance 21,969 19,737 Depreciation 9,877 9,627 Taxes other than income taxes 7,730 7,940 Income taxes 2,366 1,879 ----------------- ----------------- Total operating expenses 107,411 107,499 ----------------- ----------------- NET OPERATING INCOME 17,988 19,348 ----------------- ----------------- OTHER INCOME: Other income and deductions, net 364 204 Income taxes (166) (1) ----------------- ----------------- Other income, net of taxes 198 203 ----------------- ----------------- INCOME BEFORE INTEREST CHARGES 18,186 19,551 ----------------- ----------------- INTEREST CHARGES: Interest on long-term debt 12,498 13,506 Other interest and amortization of debt-related costs 1,063 1,005 ----------------- ----------------- Total interest charges 13,561 14,511 ----------------- ----------------- INCOME FROM CONTINUING OPERATIONS 4,625 5,040 Loss from discontinued nonregulated operations, net of taxes (note 2) - 930 ----------------- ----------------- NET INCOME 4,625 4,110 Dividends on preferred stock 38 40 ----------------- ----------------- INCOME APPLICABLE TO COMMON STOCK $ 4,587 $ 4,070 ================= ================= EARNINGS PER SHARE OF COMMON STOCK: Earnings from continuing operations $ 0.35 $ 0.38 Loss from discontinued nonregulated operations - (0.07) ----------------- ----------------- EARNINGS PER SHARE $ 0.35 $ 0.31 ================= ================= DIVIDENDS PER SHARE OF COMMON STOCK $ 0.27 $ 0.245 ================= ================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,188 13,025 ================= ================= 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, ------------------------------------------ 1998 1997 ------------------ -------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from sales to customers 130,245 130,089 Purchased power (61,749) (55,719) Fuel costs paid (8,010) (9,503) Cash paid for payroll and to other suppliers (38,062) (33,494) Interest paid, net of amounts capitalized (15,592) (20,828) Income taxes paid (1,739) 874 Other taxes paid (16,431) (16,110) Other operating cash receipts and payments, net 375 882 ------------------ -------------------- NET CASH USED IN OPERATING ACTIVITIES (10,963) (3,809) ------------------ -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (7,791) (5,818) Additions to other property and nonregulated investments 360 (2,806) ------------------ -------------------- NET CASH USED IN INVESTING ACTIVITIES (7,431) (8,624) ------------------ -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (3,607) (3,238) Common stock issuances 3,104 1,678 Borrowings from (repayments to) revolving credit facilities - net 26,500 120,000 Redemptions: Other long-term debt (105) (19) First mortgage bonds - (100,800) ------------------ -------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 25,892 17,621 ------------------ -------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 7,498 5,188 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,877 8,387 ------------------ -------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,375 $ 13,575 ================== ==================== RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES: Net income $ 4,625 $ 4,110 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 9,877 9,665 Amortization of debt-related costs and other deferred charges 940 967 Allowance for borrowed funds used during construction (36) (13) Deferred income taxes 3,180 290 Investment tax credits (1,086) 241 Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs (1,043) 2,072 Accrued interest (2,933) (7,271) Accrued taxes (11,322) (6,394) Changes in other current assets and liabilities (8,447) (9,722) Other, net (4,718) 2,246 ------------------ -------------------- NET CASH USED IN OPERATING ACTIVITIES $ (10,963) $ (3,809) ================== ==================== The accompanying notes are an integral part of these consolidated financial statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1998 December 31, (Unaudited) 1997 --------------- ----------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,240,719 $ 1,235,257 Construction work in progress 2,691 2,281 --------------- ----------------- Total 1,243,410 1,237,538 Less accumulated depreciation 322,162 314,270 --------------- ----------------- Net utility plant 921,248 923,268 --------------- ----------------- OTHER PROPERTY AND INVESTMENTS, at cost 5,344 5,704 --------------- ----------------- CURRENT ASSETS: Cash and cash equivalents 23,375 15,877 Accounts receivable 6,301 8,585 Inventories, at lower of average cost or market: Fuel 534 483 Materials and supplies 4,355 4,440 Deferred purchased power and fuel costs 3,613 2,570 Accumulated deferred income taxes - 1,707 Other current assets 921 982 --------------- ----------------- Total current assets 39,099 34,644 --------------- ----------------- DEFERRED CHARGES 27,119 28,310 --------------- ----------------- $ 992,810 $ 991,926 =============== ================= CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholders' equity: Common stock - no par value per share. Authorized 50,000,000 shares; issued 13,228,931 shares in 1998 and 13,132,821 in 1997 $ 190,267 $ 187,163 Retained earnings 112,096 111,078 --------------- ----------------- Total common shareholders' equity 302,363 298,241 Preferred stock 3,240 3,240 Long-term debt, less current maturities 374,436 478,041 --------------- ----------------- Total capitalization 680,039 779,522 --------------- ----------------- CURRENT LIABILITIES: Current maturities of long-term debt 130,100 100 Accounts payable 22,680 27,035 Accrued interest 4,390 7,323 Accrued taxes 6,267 17,589 Customers' deposits 3,424 3,249 Accumulated deferred income taxes 587 - Other current liabilities 15,255 26,665 --------------- ----------------- Total current liabilities 182,703 81,961 --------------- ----------------- REGULATORY TAX LIABILITIES 4,931 6,318 ACCUMULATED DEFERRED INCOME TAXES 88,526 85,250 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 20,011 21,149 DEFERRED CREDITS 16,600 17,726 COMMITMENTS AND CONTINGENCIES (Notes 3, 4, and 5) --------------- ----------------- $ 992,810 $ 991,926 =============== ================= 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, --------------------------------------- 1998 1997 ------------------ ------------------ (In thousands) OPERATING REVENUES $ 124,575 $ 126,223 ------------------ ------------------ OPERATING EXPENSES: Purchased power 57,510 58,347 Fuel 7,959 9,969 Other operating and maintenance 19,270 18,770 Depreciation of utility plant 9,872 9,610 Taxes other than income taxes 8,384 7,795 Income taxes 2,804 2,065 ------------------ ------------------ Total operating expenses 105,799 106,556 ------------------ ------------------ NET OPERATING INCOME 18,776 19,667 ------------------ ------------------ OTHER INCOME: Other income and deductions, net 195 159 Income taxes (93) (1) ------------------ ------------------ Other income, net of taxes 102 158 ------------------ ------------------ INCOME BEFORE INTEREST CHARGES 18,878 19,825 ------------------ ------------------ INTEREST CHARGES: Interest on long-term debt 12,498 13,506 Other interest and amortization of debt-related costs 1,061 1,005 ------------------ ------------------ Total interest charges 13,559 14,511 ------------------ ------------------ NET INCOME 5,319 5,314 Dividends on preferred stock 38 40 ------------------ ------------------ INCOME APPLICABLE TO COMMON STOCK $ 5,281 $ 5,274 ================== ================== 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, ------------------------------------- 1998 1997 ----------------- ----------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from sales to customers $ 125,267 $ 129,737 Purchased power (61,749) (55,719) Fuel costs paid (8,010) (9,503) Cash paid for payroll and to other suppliers (28,072) (27,548) Interest paid, net of amounts capitalized (15,588) (20,828) Income taxes paid - 3 Other taxes paid (17,486) (16,852) Other operating cash receipts and payments, net 193 846 ----------------- ----------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (5,445) 136 ----------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (7,694) (5,818) Additions to other property and investments - - ----------------- ----------------- CASH FLOWS USED IN INVESTING ACTIVITIES (7,694) (5,818) ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (10,038) (9,040) Borrowings from (repayments to) revolving credit facilities - net 26,500 120,000 Redemptions: First mortgage bonds - (100,800) ----------------- ----------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 16,462 10,160 ----------------- ----------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 3,323 4,478 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,772 5,115 ----------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,095 $ 9,593 ================= ================= RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $ 5,319 $ 5,314 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation of utility plant 9,872 9,610 Amortization of debt-related costs and other deferred charges 940 967 Allowance for borrowed funds used during construction (36) (13) Deferred income taxes 3,846 (467) Investment tax credits (1,085) 334 Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs (1,043) 2,072 Accrued interest (2,933) (7,271) Accrued taxes (8,994) (6,855) Changes in other current assets and liabilities (5,098) (6,319) Other, net (6,233) 2,764 ----------------- ----------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (5,445) $ 136 ================= ================= 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, 1998 December 31, (Unaudited) 1997 ---------------- --------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,240,671 $ 1,235,239 Construction work in progress 2,691 2,281 ---------------- --------------- Total 1,243,362 1,237,520 Less accumulated depreciation 322,162 314,270 ---------------- --------------- Net utility plant 921,200 923,250 ---------------- --------------- OTHER PROPERTY AND INVESTMENTS, at cost 214 214 ---------------- --------------- CURRENT ASSETS: Cash and cash equivalents 6,095 2,772 Accounts receivable 278 2,342 Inventories, at lower of average cost or market: Fuel 534 483 Materials and supplies 4,355 4,440 Deferred purchased power and fuel costs 3,613 2,570 Accumulated deferred income taxes - 1,707 Other current assets 356 222 ---------------- --------------- Total current assets 15,231 14,536 ---------------- --------------- DEFERRED CHARGES 29,716 29,006 ---------------- --------------- $ 966,361 $ 967,006 ================ =============== 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 222,146 222,146 Retained earnings 60,049 64,768 ---------------- --------------- Total common shareholder's equity 282,302 287,021 Redeemable cumulative preferred stock 3,240 3,240 Long-term debt, less current maturities 374,400 477,900 ---------------- --------------- Total capitalization 659,942 768,161 ---------------- --------------- CURRENT LIABILITIES: Current maturities of long-term debt 130,100 100 Accounts payable 21,908 24,859 Accrued interest 4,390 7,323 Accrued taxes 8,757 17,751 Customers' deposits 3,424 3,249 Accumulated deferred income taxes 587 - Other current liabilities 11,502 19,148 ---------------- --------------- Total current liabilities 180,668 72,430 ---------------- --------------- REGULATORY TAX LIABILITIES 4,931 6,318 ACCUMULATED DEFERRED INCOME TAXES 84,011 81,085 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 20,239 21,286 DEFERRED CREDITS 16,570 17,726 COMMITMENTS AND CONTINGENCIES (Notes 3, 4, and 5) ---------------- --------------- $ 966,361 $ 967,006 ================ =============== 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 1997 Combined Annual Report on Form 10-K. Prior period statements have been reclassified in order to be consistent with current period presentation. The reclassification had no effect on net income or common shareholders equity. Note 2. Discontinued Nonregulated Operations As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, management authorized a plan to discontinue the construction activities segment of Facility Works Inc. (FWI), TNP's wholly owned unregulated subsidiary, in late 1997. FWI is continuing to operate its service and maintenance segment of its business. The loss incurred by FWI's construction segment during the first quarter of 1997 has been reclassified as a loss from discontinued operations. The construction segment is expected to be fully disposed by the end of 1998. Note 3. Regulatory Matters Texas Transition to Competition Plan As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, TNMP and the staff of the Public Utility Commission of Texas (PUCT), along with other signatories, reached an agreement on TNMP's proposed transition to competition plan on December 22, 1997. The agreement proposes a five-year transition period and allows TNMP's customers to choose their electric supplier at the end of the transition period. The agreement provides the opportunity for TNMP to recover a portion of its stranded costs during the transition period and establishes a competitive transition charge to recover any stranded costs that remain at the end of the transition period over the subsequent five years. Hearings conducted by the State Office of Administrative Hearings were completed during the first quarter of 1998. PUCT approval is expected by mid-1998. Fuel Reconciliation On April 21, 1998, the PUCT issued a final order to approve the stipulated agreement regarding TNMP's filed fuel reconciliation for the period from September 30, 1993 to December 31, 1996. As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, the agreement specifies all fuel costs incurred during the reconciliation period should be approved as reasonable and necessary costs. Also, the agreement does not propose a change to the fixed fuel factor; however, it specifies the fuel factor is expected to be addressed in the "Texas Transition to Competition Plan" described above. Note 4. Accounting for the Effects of Regulation TNMP's financial statements currently reflect assets and costs based on current cost-based ratemaking regulations in accordance with Statement of Financial Accounting Standards No. 71 (SFAS 71), Accounting for the Effects of Certain Types of Regulation. Continued applicability of SFAS 71 to 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. As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, as a result of the Community Choice program in New Mexico, TNMP discontinued the application of SFAS 71 to its generation/power supply operations in New Mexico during 1997. The discontinuing of regulatory accounting principles had no effect on TNMP's financial condition. As discussed in Note 3, TNMP has reached an agreement with the staff of the PUCT and other signatories regarding TNMP's proposed transition to competition plan. This agreement, subject to PUCT approval, would result in TNMP discontinuing the application of SFAS 71 to its generation/power supply operations in Texas. If the plan is approved without significant modification, the discontinuing of regulatory accounting principles is not expected to have a material effect on TNMP's financial condition. Management believes that, as of March 31, 1998, and for the foreseeable future, TNMP's transmission and distribution operations continue to follow SFAS 71. Note 5. Commitments and Contingencies Legal Actions As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, TNMP is the defendant in a suit styled Clear Lake Cogeneration Limited Partnership vs. Texas-New Mexico Power Company. As of filing date of this Form 10-Q, no changes to this matter have occurred. As discussed in TNP's and TNMP's 1997 Combined Annual Report on Form 10-K, TNMP is the defendant in a suit styled Phillips Petroleum Company vs. Texas-New Mexico Power Company. As of the filing date of this Form 10-Q, no changes to this matter have occurred. 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 $4.6 million for the quarter ended March 31, 1998 as compared to $4.1 million for the quarter ended March 31, 1997. Excluding the loss on FWI's discontinued operations incurred during 1997, earnings for the first quarter of 1997 were $5.0 million. Earnings decreased slightly as compared to the corresponding 1997 quarter primarily due to losses associated with FWI's service and maintenance activities. As discussed in Note 2, FWI adopted a revised strategy in late 1997 to concentrate on service and maintenance activities and discontinue its construction segment. For the first quarter of 1998, FWI's service segment incurred a net loss of $0.5 million on revenues of $0.8 million as compared to a 1997 first quarter net loss of $0.1 million on revenues of $0.6 million. FWI's 1998 operating results were comparable to management's forecasted expectations. 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 The following table summarizes the components of operating revenues (in thousands). Three Months Ended March 31, --------------------------- Increase 1998 1997 (Decrease) ------- ------- ---------- Operating revenues $ 124,575 $ 126,223 $ (1,648) Less pass-through items 64,128 67,542 (3,414) ------- ------- --------- Base revenues $ 60,447 $ 58,681 $ 1,766 ======= ======= ========= Pass-through items are the portion of operating revenues that recover the costs of purchased power and fuel 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." The following table summarizes the components of the base revenues increase from the 1997 to 1998 (in thousands). Base revenues ------------- Weather related $ (596) Reserve for rate refund (779) Customer growth 910 Industrial - economy rate sales 382 Industrial - firm rate sales (760) Transmission revenue 2,114 Price / sales mix and other 495 -------- Base revenues increase $ 1,766 ======== Current quarter base revenues increased $1.8 million, or 1.3%, compared to the corresponding 1997 period. The base revenues increase resulted from increased transmission revenues and were partially offset by reserve for Texas rate refund, loss of a significant industrial customer, and mild weather during the first quarter of 1998 as discussed below. Transmission revenues increased as a result of the first quarter of 1998 being recorded under a different methodology than the first quarter of 1997. During 1996, the PUCT passed a wholesale transmission access rule which established a regional method of transmission pricing, terms, and conditions. This 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 filed an appeal in a state district court. On April 20, 1998, the court dismissed the appeal, and affirmed the validity and constitutionality of Texas transmission access rules. TNMP did not begin recording its transmission revenues and expense in accordance with the new rules until the second quarter of 1997. During the first quarter of 1998, TNMP reserved $779,000 for potential rate reductions for its Texas customers. As discussed in Note 3, TNMP has filed a Transition to Competition Plan with the PUCT that proposes rate reductions retroactively to January 1, 1998. The following table summarizes the components of gigawatt-hour (GWH) sales. Three Months Ended March 31, ---------------------------- Increase 1998 1997 (Decrease) ----- ----- -------- GWH sales: Residential 478 494 (16) Commercial 382 380 2 Industrial: Firm 175 267 (92) Economy 1,061 1,061 - Power marketing 113 30 83 Other 25 25 - ----- ----- -------- Total GWH sales 2,234 2,257 (23) ===== ===== ======== Current quarter sales of 2,234 GWHs decreased by 23 GWHs (or 1%) as compared to the corresponding 1997 quarter sales of 2,257 GWHs. The decrease resulted from the loss of a significant industrial customer and the unfavorable impact of extremely mild weather to residential sales. Partially offsetting the decrease were increased sales from power marketing activities. Operating Expenses The following table summarizes the components of TNMP's total operating expenses (in thousands). Three Months Ended March 31, ---------------------------- Increase 1998 1997 (Decrease) ------ ------ -------- Pass-through expenses: Purchased power $ 56,464 $ 58,347 $ (1,883) Fuel 7,664 9,195 (1,531) ------- ------- -------- Total pass-through items 64,128 67,542 (3,414) Purchased power costs in excess of revenue recovery 1,046 - 1,046 Other operating expenses 29,437 29,154 283 Income and other tax expenses 11,188 9,860 1,328 ------- ------- -------- Operating expenses $105,799 $ 106,556 $ (757) ======= ======= ======== Overall, current quarter operating expenses were slightly lower than prior quarter as reduced pass-through costs were offset by incurring purchased power costs in excess of revenue recovery and increased income and other tax expenses. Pass-through Expenses Pass-through expenses consist of certain purchased power and fuel costs. Current quarter pass-through expenses were $3.4 million lower than prior quarter due to decreases in both types of costs. Purchased Power. Purchased power costs decreased by $1.9 million in the current quarter due primarily to reduced power requirements to meet lower GWH sales as explained above. Fuel. The decrease in the current quarter of $1.5 million is attributed to the reduction in residential and firm industrial 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. Purchased Power Costs in Excess of Revenue Recovery TNMP incurred $1.0 million of purchased power costs in excess of revenue recovery due to the implementation of New Mexico Community Choice during 1997. This plan freezes customer rates (including the recovery of purchased power costs) during the transition period that ends on May 1, 2000. As a direct result, purchased power costs incurred in New Mexico are not fully recovered in customer rates. This additional cost was offset by increased base revenue generated from a recently renegotiated agreement with a significant industrial customer in New Mexico. As discussed in Note 4, the implementation of this plan resulted in TNMP discontinuing the application of SFAS 71 for the power supply portion of TNMP's New Mexico operations. 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 $1.3 million. The increases are due to higher pre-tax income, higher state income taxes, and franchise taxes. Interest Expense Interest charges decreased by $1.0 million due to reduced debt levels of the credit facilities. 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 was lower for the current year quarter as compared to prior year quarter due to lower receipts from customers and higher payments for purchased power costs. TNP's consolidated cash flow from operations also was lower than the prior year quarter due to the same reasons as discussed above in addition to $1.6 million of cash used by Facility Works in winding down its construction business. 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 $123.5 million, subject to interest coverage and capitalization tests. Under the 1995 Facility, TNMP can borrow up to $73.5 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. 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. Other Matters New Accounting Standards The Financial Accounting Standards Board issued SFAS 130, Reporting Comprehensive Income, which became effective January 1, 1998. SFAS 130 requires companies to report all changes in common shareholders equity during a period, except those resulting from investment by owners and distribution to owners, in a financial statement for the period in which they are recognized. This statement also requires prior period restatement for the comparative years presented during the period of adoption. Comprehensive income as defined by SFAS 130 will not be materially different from net income recorded on the accompanying consolidated statements of income. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The following exhibits are filed with this report: 10 Amendment dated March 31,1998 to Amended and Restated Agreement for Electric Service (dated May 14, 1990), as Amended, Between Texas-New Mexico Power Company and Texas Utilities Electric Company. 27(a) Financial Data Schedule for TNP. 27(b) Financial Data Schedule for TNMP. (b) Reports on Form 8-K - None Statement Regarding Forward Looking Information The discussions in this document that are not historical facts, including, but not limited to, the outcome of current and future rate/regulatory proceedings, 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's and TNMP's operations (particularly the transition to competition proceedings now pending before the PUCT); future acquisitions or strategic partnerships; general business and economic conditions; negotiations regarding TNMP's proposal regarding transition to competition in its Texas service area; and other factors described from time to time in TNP's 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. AND TEXAS-NEW MEXICO POWER COMPANY Date: May 4, 1998 By \s\ MANJIT S. CHEEMA ----------------------- Manjit S. Cheema Senior Vice President and Chief Financial Officer Date: May 4, 1998 By \s\ SCOTT FORBES ------------------- Scott Forbes Controller and as Chief Accounting Officer EX-10 2 AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR ELECTRIC SERVICE, AS AMENDED BETWEEN TEXAS-NEW MEXICO POWER COMPANY AND TEXAS UTILITIES ELECTRIC COMPANY This Amendment ("Amendment") to Amended and Restated Agreement for Electric Service, dated May 14, 1990, as Amended ("Agreement") is made and entered into on this 31st day of March, 1998, by Texas-New Mexico Power Company, a Texas corporation ("TNMP"), and Texas Utilities Electric Company, a Texas corporation ("TU Electric"). WITNESSETH: WHEREAS, TNMP and TU Electric desire to clarify and make certain the time period, as well as the amount of power and energy requirements, for the supply of said power and energy requirements to the Lewisville point of delivery; and WHEREAS, TU Electric and TNMP are willing to amend the Agreement to provide for such clarification upon the terms and conditions set forth herein. NOW, THEREFORE, for and in consideration of the promises and mutual covenants and agreements contained herein, the parties hereby agree as follows: 1. From the date of this amendment through December 31, 1998, electric service as presently provided by TU Electric to TNMP will continue as currently in effect under the Agreement. 2. Paragraph 18 of the Agreement, entitled "TNMP Points of Delivery Specified in Exhibit D," is hereby amended so as to read as follows: b. From and after January 1, 1999 until June 30, 2002, TNMP will purchase from TU Electric all of the power and energy requirements of its customers at the Lewisville point of delivery and at no other point of delivery. If TNMP is required by applicable law to purchase power and energy from a qualifying facility as described in Paragraph 13a, that power and energy shall not be utilized to offset TNMP's obligation to purchase all of the power and energy requirements of its customers at Lewisville from TU Electric. Any capacity and energy purchased by TNMP from a qualifying facility shall be scheduled and utilized through the TNMP control area by TNMP outside the Lewisville point of delivery. 3. Paragraph 5 of the Agreement is deleted and the following language is inserted: The Agreement will terminate on June 30, 2002, without any further notice by either party. Both parties specifically agree and acknowledge that neither TU Electric nor TNMP has a continuing obligation or duty with regard to providing or receiving electric service after June 30, 2002. Both parties further agree, however, that the Agreement will not terminate prior to June 30, 2002, except in the event of a material breach of the terms of the Agreement resulting from the actions of one of the parties occurring subsequent to the date of this Amendment. 4. In the event of any conflict between the provisions of this Amendment and the provisions of the Agreement, this Amendment shall control. 5. Except as otherwise expressly provided for herein, the Agreement shall continue in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized officers on the date first written above. TEXAS UTILITIES ELECTRIC COMPANY By: __________________________________________________ Title: __________________________________________________ TEXAS NEW-MEXICO POWER COMPANY By: __________________________________________________ Title: __________________________________________________ EX-27 3
UT 0000741612 TNP ENTERPRISES, INC 3-MOS DEC-31-1998 MAR-31-1998 PER-BOOK 921,248 5,344 39,099 27,119 0 992,810 190,267 0 112,096 302,363 0 3,240 374,436 0 0 0 130,100 0 0 0 182,671 992,810 125,399 2,366 105,045 107,411 17,988 198 18,186 13,561 4,625 38 4,587 3,569 12,498 (10,963) 0.35 0.35
EX-27 4
UT 0000022767 TEXAS-NEW MEXICO POWER CO 3-MOS DEC-31-1998 MAR-31-1998 PER-BOOK 921,200 214 15,231 29,716 0 966,361 107 222,146 60,049 282,302 0 3,240 374,400 0 0 0 130,100 0 0 0 176,319 966,361 124,575 2,804 102,995 105,799 18,776 102 18,878 13,559 5,319 38 5,281 10,000 12,498 (5,445) 0 0
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