-----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, OMS++P7maStfLrEfx/xAUTnIWJg9NwXQIP6V6XBZ8f0c6E9nGAxtyhCc+AEOwpj/ 1C8o1vzcniIIWRsuFyIVlQ== 0000092521-96-000008.txt : 19960419 0000092521-96-000008.hdr.sgml : 19960419 ACCESSION NUMBER: 0000092521-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960415 DATE AS OF CHANGE: 19960418 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWESTERN PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000092521 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 750575400 STATE OF INCORPORATION: NM FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03789 FILM NUMBER: 96547653 BUSINESS ADDRESS: STREET 1: SPS TOWER STREET 2: TYLER AT SIXTH ST CITY: AMARILLO STATE: TX ZIP: 79170 BUSINESS PHONE: 8063782121 MAIL ADDRESS: STREET 1: PO BOX 1261 CITY: AMARILLO STATE: TX ZIP: 79170 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 1996 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 1-3789 SOUTHWESTERN PUBLIC SERVICE COMPANY (Exact name of registrant as specified in its charter) New Mexico 75-0575400 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Tyler at Sixth, Amarillo, Texas 79101 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including area code (806) 378-2121 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 __ As of April 10, 1996, 40,917,908 shares of the Company's common stock were outstanding. SOUTHWESTERN PUBLIC SERVICE COMPANY FORM 10-Q For the Quarter Ended February 29, 1996 TABLE OF CONTENTS PART I. Financial Information (Unaudited, except Condensed Consolidated Balance Sheet at August 31, 1995) Condensed Consolidated Balance Sheets at February 29, 1996 and August 31, 1995 Condensed Consolidated Statements of Earnings for the three, six and twelve months ended February 29, 1996 and February 28, 1995 Condensed Consolidated Statements of Cash Flows for the six and twelve months ended February 29, 1996 and February 28, 1995 Notes to Condensed Consolidated Financial Statements Independent Accountants' Report Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. Other Information Signatures Exhibit 12. Statement of Computation of Ratio of Earnings PART I. FINANCIAL INFORMATION
SOUTHWESTERN PUBLIC SERVICE COMPANY Condensed Consolidated Balance Sheets Assets February 29, August 31, 1996 1995 (Unaudited) (In Thousands) Utility plant: Utility plant in service $ 2,430,157 $ 2,366,435 Accumulated depreciation (887,467) (854,015) Net plant in service 1,542,690 1,512,420 Construction work in progress 62,270 31,026 Net utility plant 1,604,960 1,543,446 Nonutility property and investments 73,038 70,087 Current assets: Cash and temporary investments 15,895 36,860 Accounts receivable, net 59,001 73,262 Accrual for unbilled revenues 17,159 28,626 Materials and supplies, at average cost 20,793 21,647 Prepayments and other current assets 8,067 10,734 Total current assets 120,915 171,129 Deferred debits 136,825 124,343 Total assets $ 1,935,738 $ 1,909,005 Continued . . . See accompanying notes to condensed consolidated financial statements
SOUTHWESTERN PUBLIC SERVICE COMPANY Condensed Consolidated Balance Sheets Capitalization and Liabilities February 29, August 31, 1996 1995 (Unaudited) (In Thousands) Capitalization: Common stock, $1 par value, authorized - 100,000,000 shares; issued and outstanding - 40,917,908 shares $ 40,918 $ 40,918 Premium on capital stock 307,484 306,376 Retained earnings 367,203 373,458 Total common shareholders' equity 715,605 720,752 Preferred stock - redemption not required - 72,680 Long-term debt 565,760 582,276 Total capitalization 1,281,365 1,375,708 Current liabilities: Short-term debt 138,834 - Current maturities of long-term debt 15,182 276 Accounts payable 9,243 12,187 Liability for refunds to customers 677 5,969 Interest accrued 8,967 9,067 Fuel and purchased power expense accrued 31,617 40,164 Taxes accrued 7,707 39,757 Dividends payable on common stock 22,505 22,505 Other current liabilities 40,130 39,843 Total current liabilities 274,862 169,768 Deferred credits: Deferred income taxes 361,894 344,794 Unamortized investment tax credits 5,928 6,053 Other 11,689 12,682 Total deferred credits 379,511 363,529 Total capitalization and liabilities $1,935,738 $1,909,005 See accompanying notes to condensed consolidated financial statements.
SOUTHWESTERN PUBLIC SERVICE COMPANY Condensed Consolidated Statements of Earnings (Unaudited) Three Months Ended Six Months Ended Twelve Months Ended 2-29-96 2-28-95 2-29-96 2-28-95 2-29-96 2-28-95 (In Thousands, Except Per Share Amounts) Operating revenues $203,785 $181,848 $404,742 $369,065 $869,760 $820,050 Operating expenses: Operation: Fuel 94,658 83,622 184,108 167,648 386,511 381,415 Purchased power 3,188 1,232 4,626 2,331 7,536 4,500 Other 29,636 25,679 58,193 51,411 114,248 108,051 Maintenance 7,809 8,056 15,043 15,946 28,137 30,617 Depreciation and amortization 16,459 15,287 32,847 30,579 63,337 59,897 Taxes other than property and income taxes 5,131 4,857 10,408 9,667 19,864 19,364 Property taxes 5,919 6,017 11,597 11,861 23,745 23,392 Income taxes (note 2) 12,184 9,313 25,881 21,749 68,005 55,448 Total operating expenses 174,984 154,063 342,703 311,192 711,383 682,684 Operating income 28,801 27,785 62,039 57,873 158,377 137,366 Other income, net: Income taxes (note 2) (708) (731) (1,293) (1,217) (3,850) (496) Other, net 2,075 1,972 3,578 3,507 11,045 2,491 Total other income, net 1,367 1,241 2,285 2,290 7,195 1,995 Interest charges 12,087 10,349 23,075 20,317 44,692 40,764 Net earnings 18,081 18,677 41,249 39,846 120,880 98,597 Dividends and premiums on cumulative preferred stock 1,275 1,220 2,494 2,439 4,933 4,878 Earnings applicable to common stock $ 16,806 $ 17,457 $ 38,755 $ 37,407 $115,947 $ 93,719 Earnings per common share* $ 0.41 $ 0.43 $ 0.95 $ 0.91 $ 2.83 $ 2.29 Weighted average shares outstanding 40,918 40,918 40,918 40,918 40,918 40,918 Dividends declared per common share $ 0.55 $ 0.55 $ 1.10 $ 1.10 $ 2.20 $ 2.20 ( ) Denotes deduction. *Based on weighted average shares outstanding. See accompanying notes to condensed consolidated financial statements.
SOUTHWESTERN PUBLIC SERVICE COMPANY Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended Twelve Months Ended 2-29-96 2-28-95 2-29-96 2-28-95 (In Thousands) Operating Activities: Cash received from customers $ 424,689 $ 400,557 $ 848,235 $ 831,068 Cash paid to suppliers and employees (270,355) (258,663) (522,011) (530,698) Interest paid (23,510) (20,207) (45,393) (40,236) Income taxes paid (42,344) (32,882) (59,550) (45,803) Taxes other than income taxes paid (30,902) (31,145) (41,655) (41,777) Other operating cash receipts and payments, net (139) 2,938 6,742 15,497 Net cash provided by operating activities 57,439 60,598 186,368 188,051 Investing Activities: Construction expenditures (64,401) (44,567) (114,496) (89,479) Nonutility property and investments (2,951) (11,640) (19,530) (17,219) Acquisitions (29,200) - (29,200) - Net cash used in investing activities (96,552) (56,207) (163,226) (106,698) Financing Activities: Issuance of long-term debt - 70,000 6,204 70,000 Retirement of long-term debt (1,610) (16,469) (2,021) (16,433) Change in short-term debt 138,834 (14,994) 138,834 (44,500) Redemption of preferred stock (71,572) - (71,572) - Dividends paid (common and preferred) (47,504) (47,449) (94,953) (94,898) Net cash provided by (used in) financing activities 18,148 (8,912) (23,508) (85,831) Net Decrease in Cash and Temporary Investments (20,965) (4,521) (366) (4,478) Cash and Temporary Investments at Beginning of Period 36,860 20,782 16,261 20,739 Cash and Temporary Investments at End of Period $ 15,895 $ 16,261 $ 15,895 $ 16,261 Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: Net earnings $ 41,249 $ 39,846 $ 120,880 $ 98,597 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 32,847 30,579 63,337 59,897 Deferred income taxes and investment tax credits 7,983 5,445 12,005 13,607 Allowance for equity funds used during construction (60) (43) (245) (31) Cash flows impacted by changes in: Accounts receivable 14,261 13,604 (3,248) 2,322 Accrual for unbilled revenues 11,467 18,820 (14,661) 7,401 Materials and supplies 854 (2,431) (124) (2,068) Accounts payable (2,944) (3,980) 1,025 (3,159) Fuel and purchased power expense accrued (8,547) (14,605) 5,338 (3,611) Taxes accrued (32,050) (24,990) 2,339 1,531 Liability for refunds to customers (5,292) (442) (2,686) 2,272 Other, net (2,329) (1,205) 2,408 11,293 Net cash provided by operating activities $ 57,439 $ 60,598 $ 186,368 $ 188,051 See accompanying notes to condensed consolidated financial statements.
SOUTHWESTERN PUBLIC SERVICE COMPANY Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Interim periods. The results of operations for the interim periods are not necessarily an indication of the expected results for the fiscal year due to the seasonal nature of Southwestern Public Service Company's (the Company) business. The unaudited condensed consolidated financial statements included herein were prepared from the books of the Company in accordance with generally accepted accounting principles and reflect all adjustments (none of which are other than normal recurring adjustments) which are, in the opinion of management, necessary to provide a fair statement of the results of operations and financial position for the interim periods. Such financial statements generally conform to the presentation reflected in the Company's Annual Report to Shareholders. The current interim periods reported herein are included in the fiscal year subject to independent audit at the end of the year. (2) Income taxes. The components of income tax expense (benefit)are as follows:
Three Months Ended Six Months Ended Twelve Months Ended 2-29-96 2-28-95 2-29-96 2-28-95 2-29-96 2-28-95 (In Thousands) Taxes on operating income: Federal-current $ 6,416 $ 5,831 $16,466 $15,490 $52,569 $39,800 Federal-deferred 5,012 3,207 8,299 5,697 13,273 14,142 Investment tax credits (63) (63) (125) (125) (250) (250) State-current 819 338 1,241 687 2,413 1,756 12,184 9,313 25,881 21,749 68,005 55,448 Taxes on other income: Federal-current 737 837 1,467 1,332 4,838 769 Federal-deferred (40) (118) (191) (127) (1,018) (285) State-current 11 12 17 12 30 12 708 731 1,293 1,217 3,850 496 Total income taxes $12,892 $10,044 $27,174 $22,966 $71,855 $55,944
(3) Merger with Public Service Company of Colorado (PSCo). The Company and Denver-based PSCo entered into a definitive merger agreement (the Merger) on August 22, 1995, to form a registered public utility holding company named New Century Energies, Inc., which will be the parent company for the Company and PSCo. The shareholders of the Company and PSCo approved the Agreement and Plan of Reorganization, as amended, at their respective shareholder meetings on January 31, 1996. The transaction is still subject to various conditions, including the approval of, or the taking of other action by, the Securities and Exchange Commission, the Federal Trade Commission, the Department of Justice, the Federal Energy Regulatory Commission, and the state public utility commissions in Texas, Colorado, New Mexico and Wyoming. Requested approvals have been received from Kansas and the Nuclear Regulatory Commission. Requisite applications have been filed with the applicable state jurisdictions, the Securities and Exchange Commission and the Federal Energy Regulatory Commission and numerous intervenors have filed in certain of the proceedings. Hearings have been scheduled in Texas for June 17, 1996, in Colorado for July 1, 1996, and in New Mexico for July 22, 1996. The Merger, with a targeted completion date in the fall of 1996, is conditioned on qualifying as a tax-free reorganization and being accounted for as a pooling of interests. (4) Long-Term Debt. The Company made a public offering of $60 million of 6.50% First Mortgage Bonds (Bonds) on March 8, 1996. The proceeds from the Bonds were applied primarily to the retirement of short-term debt. (5) Rate and Regulatory Matters. A Public Utility Commission of Texas (PUCT) substantive rule requires periodic examination of the Company's fuel and purchased power costs, the efficiency of the use of such fuel and purchased power, fuel acquisition and management policies and purchase power commitments. On May 1, 1995, the Company filed with the PUCT a petition for a fuel reconciliation for the months of January 1992 through December 1994. A hearing was held in September 1995, and in January 1996 an order was issued which required the Company to make a $3.9 million fuel refund consisting of $2.1 million of overrecovered fuel costs (which has previously been accrued) and $1.8 million of disallowed fuel costs for the period. Additionally, the order required the Company to flow through to customers 100% of margins from non-firm off-system opportunity sales as of January 1995. Prior Commission rulings had allowed the Company to retain 25% of these margins. The retained portion of these margins for calendar year 1995 was $2.3 million. The Company filed a motion for rehearing on January 25, 1996. The PUCT issued an order on March 14 denying rehearing on the fuel disallowance, (which was adjusted to $1.9 million), and ordered the 100% margin flow through effective with the first billing cycle after the date of the order. The Company filed a motion for rehearing of the March 14 order on April 3. The ultimate outcome of this matter will not significantly affect consolidated financial results. In December 1989 the FERC issued its order regarding the 1985 rate case. The Company appealed certain portions of the order that related to recognition in rates of the reduction of the federal income tax rate from 46% to 34%. The United States Court of Appeals for the District of Columbia Circuit remanded the case, directing the FERC to reconsider the Company's claim of an offsetting cost and limiting the FERC's actions. The FERC issued its Order on Remand in July 1992, required filings were made and a hearing was completed in February 1994. In October 1994, the administrative law judge issued a favorable initial decision that, if approved by the FERC, would result in a substantial recovery by the Company. Negotiated settlements with the Company's partial requirements customers and Texas-New Mexico Power Company were approved by the FERC in July 1993 and September 1993, respectively, and the Company received approximately $2.8 million. In a settlement with the Company's New Mexico cooperative customers, which the FERC approved in July 1995, the Company received approximately $7.0 million, including interest. Resolutions with the remaining wholesale customers, Golden Spread member cooperatives and Lyntegar Electric Cooperative have not been reached. The Company cannot reasonably estimate the ultimate amount recoverable from these proceedings; however, if a favorable resolution is reached in 1996, it could materially improve consolidated earnings for the year. In August 1995 the Company agreed to purchase TUCO, Inc. (TUCO), a wholly owned subsidiary of Cabot Corporation, for $77 million subject to regulatory approval and other conditions. TUCO owns the coal inventory maintained at the Company's Harrington and Tolk generating stations. It also administers contracts with coal mines, railroads and the coal-handling operator at the two coal-fueled power plants. This purchase would be expected to lower fuel costs. On February 7, 1996, the PUCT denied certain rule waivers for rate treatment which are necessary to complete the purchase; however, the Company has applied for rehearing and the matter is pending. (6) General. See note (1) of Notes to Consolidated Financial Statements in the Company's 1995 Annual Report on Form 10-K for a summary of the Company's significant accounting policies. Independent Accountants' Report Southwestern Public Service Company: We have reviewed the accompanying condensed consolidated balance sheet of Southwestern Public Service Company and subsidiaries as of February 29, 1996, and the related condensed consolidated statements of earnings for the three-month, six-month and twelve-month periods ended February 29, 1996, and February 28, 1995, and cash flows for the six-month and twelve-month periods ended February 29, 1996, and February 28, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet and statement of capitalization of Southwestern Public Service Company and subsidiaries as of August 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated October 10, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP April 12, 1996 Dallas, Texas MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating Revenues and Kilowatt-Hour Sales Substantially all of the Company's operating revenues result from the sale of electric energy. The principal factors determining revenues are the amount and price per unit of energy sold. The following table describes the principal components of changes in revenues.
Increase (Decrease) From Corresponding Prior Period Three Months Six Months Twelve Months Ended Ended Ended 2-29-96 2-29-96 2-29-96 (Dollars In Thousands) Estimated effect on revenues of variations in: Kilowatt-hour (kwh) sales* $ 13,399 $20,847 $41,525 Rates 433 2,201 9,952 Fuel and purchased power cost recovery 5,673 11,716 1,990 Subtotal 19,505 34,764 53,467 Non-firm kwh sales 2,432 913 (3,757) Total revenue increase $21,937 $35,677 $49,710 Increase in kwh sales* (in millions) 342 524 1,008 Decrease in non-firm kwh sales (in millions) (1) (205) (429) *Comprised of retail and wholesale excluding economy and interruptible (non-firm) wholesale kwh sales.
Variations in Kwh Sales. The revenue increases in the three-, six- and twelve-month periods are attributable primarily to increased sales to rural electric cooperatives (RECs). This increase is principally due to sales to Cap Rock Electric Cooperative that began in February 1994 and increased to 100% of Cap Rock's West Texas requirements in February 1995. Increased irrigation sales, reflecting below normal precipitation, also contributed to the rise in REC sales for all periods. Improved economic conditions also positively impacted sales for all periods. Accounting adjustments to the estimate of delivered not billed kwh sales also increased revenues for the twelve-month period by approximately $8.3 million. These estimated kwh sales relate to energy used by customers but not billed until the subsequent month. Variations in Rates. Increased revenues for the twelve-month period are primarily the result of greater demand charge revenues paid by certain wholesale customers. Additionally, a settlement of the 1985 Federal Energy Regulatory Commission (FERC) rate case with the Company's New Mexico wholesale REC customers contributed increased revenues of approximately $4.0 million (and interest of $3.0 million which is included in other income). Revenues increased in the six-month period due primarily to greater demand charge revenues from certain wholesale and industrial customers. Variations in Fuel and Purchased Power Cost Recovery. Revenue increases for the three- and six-month periods are due to increased coal costs and natural gas prices. During the twelve-month period increased coal costs caused the rise in revenues. Variations in Non-Firm Kwh Sales. The amount of revenues arising from non-firm sales is dependent, in large part, upon the amount and cost of power available to the Company for sale, the demand for power, the availability of competing hydroelectric power from the Northwest and generation from major plants in the West. The decline in non-firm sales for the twelve-month period was primarily due to available power from major western plants and excess hydroelectric power in the Northwest. Although non-firm kwh sales were down in the three- and six-month periods, revenues increased because of greater demand charges paid by Public Service Company of New Mexico (PNM) due to a contractual increase of 100 megawatts of interruptible power in May 1995. However, PNM did not purchase a substantial amount of interruptible energy under this agreement during these periods. Operating Expenses and Non-Operating Items Fuel and purchased power expense comprised 55.9%, 55.1% and 55.4% of total operating expenses for the three, six and twelve months ended February 29, 1996, respectively. When compared to the corresponding periods last year, these expenses increased $13.0 million or 15.3%, $18.8 million or 11.0%, and $8.1 million or 2.1%, respectively. Fuel expense (excluding purchased power expense), per net kwh generated, increased from 1.77 to 1.94 cents, from 1.72 to 1.89 cents, and from 1.79 to 1.82 cents for the respective three-, six- and twelve-month periods because of increased coal costs for all periods and increased natural gas prices for the three- and six-month periods. Total operating expenses, excluding fuel and purchased power, increased $7.9 million or 11.5%, $12.8 million or 9.0%, and $20.6 million or 6.9%, for the respective three-, six- and twelve-month periods. These increases resulted primarily from an expected increase in merger-related expenses (see OTHER MATTERS) and from increased income taxes. Income tax expenses are higher than for the comparable periods because of higher income and because higher merger expenses incurred in the most recent periods are not deductible in determining taxable income. Other income increased in the twelve-month period due primarily to approximately $3.0 million of interest from the rate case settlement with New Mexico wholesale customers. The write-off of nonrecurring expenses of $3.4 million (related to engineering and design costs of a previously planned generating facility and business development costs related to a generation project in Missouri) reduced other income for last year. Earnings Current operating income increased for all periods due primarily to increased kwh sales to all retail customers and wholesale customers, particularly RECs. The increase in sales to RECs was due primarily to sales to Cap Rock. Increased irrigation-related sales, due to below-normal precipitation, also contributed to the rise in REC sales for all periods. Earnings applicable to common stock increased for the six- and twelve-month periods because of greater kilowatt-hour sales. The increase for the twelve-month period also reflects a change in the estimate of delivered not billed kwh sales ($5.4 million or 13 cents per share) and the New Mexico rate case settlement ($4.5 million or 11 cents per share). The decline in earnings for the three-month period was due primarily to increased interest and merger-related expenses (see OTHER MATTERS). Assuming normal weather conditions, earnings for the 1996 fiscal year are expected to remain relatively level. If a favorable resolution of the 1985 FERC rate case with Texas wholesale REC customers could be reached in 1996, it could materially improve earnings for the year. Additionally, Quixx has entered into an agreement to sell certain water rights to the Canadian River Municipal Water Authority (CRMWA) for $14.5 million that would result in an after-tax gain of approximately $7.6 million. The sale is conditioned on CRMWA receiving assurances from certain member cities that the cost of the water rights will be repaid. The Company expects the sale to close in fiscal 1996; however, management can give no assurance as to when or whether this sale will be completed. LIQUIDITY AND CAPITAL RESOURCES The Company's demand for capital is normally related to the construction of utility plant and equipment. Cash construction expenditures excluding AFUDC for the three, six and twelve months ended February 29, 1996, were $31.4 million, $64.4 million and $114.5 million, respectively. Such expenditures are expected to approximate $112.9 million for 1996. The purchase of certain Texas properties from Texas-New Mexico Power Company (TNP) for $29.2 million resulted in additional cash requirements this year. If the PUCT order denying the Company's rate treatment of the purchase of TUCO Inc. (TUCO) from Cabot Corporation for $77 million were to be reversed, that purchase would also result in additional cash requirements (See Note 5). The Company cannot accurately forecast the portion of internally generated funds to be used for capital expenditures, but expects that it will be approximately 60 percent in fiscal 1996 (including funds used for the purchase of TNP, but excluding funds used to retire the Preferred Stock discussed below, and any funds required in connection with the purchase of TUCO). The Company redeemed on December 27, 1995, all of its outstanding Preferred Stock that was redeemable by its terms. The Company also purchased on January 9, 1996, all of the outstanding 2,600 shares of its 14.50% Cumulative Preferred Stock that was not redeemable by its terms. The aggregate cost to retire the Preferred Stock was approximately $76 million, including accrued dividends. The Company financed the retirement of the Preferred Stock with short-term borrowings. On March 8, 1996, the Company issued $60 million of 6.50% First Mortgage Bonds due March 1, 2006, the net proceeds of which were used to repay a portion of the Company's outstanding short-term borrowings. The Company has effective a shelf registration under which $70 million of First Mortgage Bonds remain available for issuance. At February 29, 1996, the Company maintained committed bank lines of credit aggregating $178 million, under which there were no borrowings outstanding. At February 29, 1996, the Company had approximately $130 million of commercial paper outstanding. The holders of the Company's common stock at the Annual meeting approved the amendment of the Company's Articles to eliminate the class of Preferred Stock then authorized and to provide for a new class of 10 million shares of Preferred Stock, $1 par value, which may be issued in series with such terms and conditions as may be set by the Board of Directors. The Company currently contemplates the sale of Preferred Stock, Common Stock and Bonds during the five-year period 1996-2000 in connection with the financing of its construction program and retirement of outstanding securities. OTHER MATTERS In response to changing utility regulations, federal and state statutory changes, and evolving markets, the Company has entered into a definitive merger agreement with Public Service Company of Colorado (the Merger) (see Note 3). Consummation of the Merger is subject to customary conditions including receiving shareholder and regulatory authority approvals. The Company's shareholders approved the Merger at the Annual Meeting on January 31, 1996. The two utilities are working toward a completion date in the fall of 1996. The foregoing discussions of the Company's "Results of Operations" and "Liquidity and Capital Resources" do not take into account any changes that could arise as a result of the Merger. PART II. OTHER INFORMATION Item 4. Other Information. The Company's Annual Meeting of Shareholders was held January 31, 1996. The following persons were reelected to the Company's Board of Directors to hold office until the Annual Meeting of Shareholders in 1999. Director In Favor Withheld Danny H. Conklin 34,589,281 632,089 Bill D. Helton 34,576,181 645,189 R. R. Hemminghaus 34,543,972 677,398 Don Maddox 34,555,454 665,917 The Company's shareholders also approved an amendment to the Restated Articles of Incorporation to provide for a new class of 10 million shares of preferred stock, $1 par value, and approved the Agreement and Plan of Reorganization, as amended, with Public Service Company of Colorado. Item 5. Other Information. The Company's ratio of earnings to fixed charges for the twelve months ended February 29, 1996, was 4.94. The ratio of earnings to fixed charges and preferred dividend requirements combined was 4.26 for such period. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 12 Statement showing computations of ratio of earnings for the twelve months ended February 29, 1996 15 Letter of Deloitte & Touche LLP regarding unaudited condensed consolidated interim financial information (b) Reports on Form 8-K: Items reported - Item 5. Other Events Financial Statements filed - None Dates of reports filed - January 31, 1996, reporting shareholder approval of the Merger Agreement - February 1, 1996, filing Restated Articles of Incorporation 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. SOUTHWESTERN PUBLIC SERVICE COMPANY By Doyle R. Bunch II Executive Vice-President Accounting and Corporate Development DATE: April 12, 1996 EX-12 2 RATIO OF EARNINGS
SOUTHWESTERN PUBLIC SERVICE COMPANY EXHIBIT 12. Statement of Computation of Ratio of Earnings Twelve Months Ended February 29, 1996 (Dollars In Thousands) Computation of Ratio of Earnings to Fixed Charges: Fixed charges, as defined: Interest on long-term debt $ 43,083 Amortization of debt premium, discount and expense 545 Other interest 3,947 Estimated interest factor of rental charges 1,292 Total fixed charges $ 48,867 Earnings as defined: Net earnings per statement of earnings $ 120,880 Fixed charges as shown 48,867 Income taxes: Federal-current 57,407 Federal-deferred 12,255 State 2,443 Investment tax credits (250) Earnings available for fixed charges $ 241,602 Ratio of earnings to fixed charges 4.94 Computation of Ratio of Earnings to Fixed Charges and Preferred Dividend Requirements Combined: Total fixed charges, as shown above $ 48,867 Preferred dividend requirements* 7,814 Total fixed charges and preferred dividend requirements combined $ 56,681 Earnings available for fixed charges and preferred dividend requirements combined $ 241,602 Ratio of earnings to fixed charges and preferred dividend requirements combined 4.26 *Preferred dividend requirements: Annual preferred dividend requirement $ 4,933 Less amount deductible for income tax purposes 82 Net requirement [A] $ 4,851 1 / (100% - effective tax rate) [B] 1.594 Effective tax rate 37.3% [A] x [B] $ 7,732 Add amount deductible for income tax purposes 82 Preferred dividend requirements $ 7,814
EX-15 3 LETTER OF DELOITTE & TOUCHE LLP EXHIBIT 15. Southwestern Public Service Company: We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited condensed consolidated interim financial information of Southwestern Public Service Company and subsidiaries for the periods ended February 29, 1996, and February 28, 1995, as indicated in our report dated April 12, 1996; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, is incorporated by reference in Amendment No. 1 to Registration Statement No. 33-53171 on Form S-3, Registration Statement No. 33-27452 on Form S-8, and Registration Statement No 33-64951 on Form S-4. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. Deloitte & Touche LLP April 12, 1996 Dallas, Texas EX-27 4 FDS --
UT 1000 6-mos AUG-31-1996 FEB-29-1996 PER-BOOK 1,604,960 73,038 120,915 136,825 0 1,935,738 40,918 307,484 367,203 715,605 0 0 565,760 0 0 138,834 15,182 0 0 0 500,357 1,935,738 404,742 25,881 316,822 342,703 62,039 2,285 165,572 23,075 41,249 2,494 38,755 45,010 21,552 57,439 0.95 0
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