-----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, BOklyCFU695bGZS1PBprTiWepwusef9NlTblFZ5af/bCABmIeVrt7uC9F2dUfLuQ N4wBL9CbBg0w9AWx8NMc+w== 0000350563-99-000020.txt : 19990517 0000350563-99-000020.hdr.sgml : 19990517 ACCESSION NUMBER: 0000350563-99-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAMPA ELECTRIC CO CENTRAL INDEX KEY: 0000096271 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590475140 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05007 FILM NUMBER: 99622928 BUSINESS ADDRESS: STREET 1: 702 N FRANKLIN ST STREET 2: TECO PLZA CITY: TAMPA STATE: FL ZIP: 33602 BUSINESS PHONE: 8132284111 MAIL ADDRESS: STREET 1: TAMPA ELECTRIC CO STREET 2: TECO PLAZA 702 N FRANKLIN ST CITY: TAMPA STATE: FL ZIP: 33602 10-Q 1 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 March 31, 1999 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 1-5007 TAMPA ELECTRIC COMPANY (Exact name of registrant as specified in its charter) FLORIDA 59-0475140 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 702 North Franklin Street, Tampa, Florida 33602 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813) 228-4111 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 Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (April 30, 1999): Common Stock, Without Par Value 10 The registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. FORM 10-Q PART I. FINANCIAL INFORMATION Item 1. Condensed Financial Statements In the opinion of management, the unaudited condensed financial statements include all adjustments necessary to present fairly the results for the three-month periods ended March 31, 1999 and 1998. Reference should be made to the explanatory notes affecting the income and balance sheet accounts contained in Tampa Electric Company's Annual Report on Form 10-K for the year ended Dec. 31, 1998 and to the notes on pages 6 through 7 of this report. 2 FORM 10-Q BALANCE SHEETS unaudited (in millions) March 31, Dec. 31, 1999 1998 Assets Property, plant and equipment, at original cost Utility plant in service Electric $3,747.1 $3,742.6 Gas 536.1 518.5 Construction work in progress 88.4 71.5 4,371.6 4,332.6 Accumulated depreciation (1,743.9) (1,722.2) 2,627.7 2,610.4 Other property 8.2 8.1 2,635.9 2,618.5 Current assets Cash and cash equivalents .9 .8 Receivables, less allowance for uncollectibles 129.8 142.8 Inventories, at average cost Fuel 106.1 87.3 Materials and supplies 47.4 45.5 Prepayments 11.0 8.4 295.2 284.8 Deferred debits Unamortized debt expense 15.7 16.1 Deferred income taxes 117.2 116.1 Regulatory asset - tax related 38.3 39.0 Other 68.0 72.0 239.2 243.2 $3,170.3 $3,146.5 Liabilities and Capital Capital Common stock $1,034.1 $1,026.1 Retained earnings 286.4 288.5 1,320.5 1,314.6 Long-term debt, less amount due within one year 774.1 774.5 2,094.6 2,089.1 Current liabilities Long-term debt due within one year 4.6 4.6 Notes payable 91.9 79.7 Accounts payable 141.9 189.1 Customer deposits 78.4 77.5 Interest accrued 17.9 8.8 Taxes accrued 46.0 8.8 380.7 368.5 Deferred credits Deferred income taxes 450.1 447.6 Investment tax credits 43.9 45.1 Regulatory liability - tax related 72.0 73.0 Other 129.0 123.2 695.0 688.9 $3,170.3 $3,146.5 The accompanying notes are an integral part of the financial statements. 3 FORM 10-Q STATEMENTS OF INCOME unaudited (in millions) For the three months ended March 31, 1999 1998 Operating revenues Electric $260.9 $273.4 Gas 71.1 80.7 332.0 354.1 Operating expenses Operation Fuel - electric generation 67.5 89.1 Purchased power 20.4 11.3 Natural gas sold 29.3 38.0 Other 52.9 51.2 Maintenance 19.6 21.8 Non-recurring charge -- 9.6 Depreciation 42.7 41.3 Taxes, federal and state income 20.4 16.1 Taxes, other than income 29.7 29.8 282.5 308.2 Operating income 49.5 45.9 Other income (expense) .6 (1.9) Income before interest charges 50.1 44.0 Interest charges Interest on long-term debt 12.7 12.2 Other interest 2.8 4.6 15.5 16.8 Net Income-balance applicable to common stock $ 34.6 $ 27.2 The accompanying notes are an integral part of the financial statements. 4 FORM 10-Q STATEMENTS OF CASH FLOWS unaudited (in millions) For the three months ended March 31, 1999 1998 Cash flows from operating activities Net income $ 34.6 $ 27.2 Adjustments to reconcile net income to net cash: Depreciation 42.7 41.3 Deferred income taxes 1.1 7.2 Investment tax credits, net (1.1) (1.2) Deferred recovery clause 2.0 4.2 Deferred revenue 1.4 (8.7) Non-recurring charge -- 9.6 Receivables, less allowance for uncollectibles 12.9 33.6 Inventories (20.7) (14.1) Taxes accrued 37.3 8.1 Accounts payable (47.1) (12.8) Other 14.1 16.1 77.2 110.5 Cash flows from investing activities Capital expenditures (60.2) (39.4) Cash flows from financing activities Proceeds from contributed capital from parent 8.0 40.0 Repayment of long-term debt (.3) (.3) Net increase (decrease) in short-term debt 12.2 (78.5) Dividends (36.8) (33.8) (16.9) (72.6) Net increase (decrease) in cash and cash equivalents .1 (1.5) Cash and cash equivalents at beginning of period .8 2.8 Cash and cash equivalents at end of period $ .9 $ 1.3 The accompanying notes are an integral part of the financial statements. 5 FORM 10-Q NOTES TO FINANCIAL STATEMENTS A. Tampa Electric Company is a wholly owned subsidiary of TECO Energy, Inc. B. The company has made certain commitments in connection with its continuing construction program. Total construction expenditures during 1999 are estimated to be $222 million for the electric division and $75 million for Peoples Gas System. C. Revenues in the first quarter of 1999 reflected the deferral for refund of $1.4 million of electric revenues at Tampa Electric. These deferred revenues resulted from Tampa Electric's current regulatory agreement. Revenues in 1998's first quarter included recognition of $8.7 million of previously deferred revenues, partially offset by a stipulated temporary base rate reduction which began Oct 1, 1997 and totaled $4.4 million for the 1998 quarter. In accordance with the agreement, the temporary base rate reduction and recognition of previously deferred revenues ended in December 1998. D. As discussed in its Annual Report on Form 10-K for the year ended Dec. 31, 1998, the company recognized, in the first quarter of 1998, a $5.9-million after-tax charge at the electric division associated with ongoing actions to mitigate the effects of a 1997 Florida Public Service Commission (FPSC) ruling that separated two wholesale power sales contracts from the retail jurisdiction through 1999. 6 FORM 10-Q E. Contributions by operating division (millions) Operating Net 1999 Revenues Income Income Electric division(1)(2) $260.9 $ 39.5 $ 27.3 Peoples Gas System(3) 71.1 10.0 7.3 332.0 49.5 34.6 Non-recurring charges -- -- -- Tampa Electric Company $332.0 $ 49.5 $ 34.6 1998 Electric division(1)(2)(4) $273.4 $ 41.4 $ 26.0 Peoples Gas System(3) 80.7 10.4 7.1 354.1 51.8 33.1 Non-recurring charge -- (5.9) (5.9) Tampa Electric Company $354.1 $ 45.9 $ 27.2 (1) Operating income is net of income tax expense of $15.7 million in 1999 and $14.8 million in 1998. (2) The electric division deferred revenues of $1.4 million in 1999 for refund to customers and recognized revenues previously deferred of $8.7 million in 1998. See Note C on page 6. (3) Operating income is net of income tax expense of $4.7 million in 1999 and $5.0 million in 1998. (4) 1998 operating income and net income exclude the $5.9 million after-tax non-recurring charge discussed in Note D on page 6. 7 FORM 10-Q Item 2. Management's Narrative Analysis of Results of Operations Three months ended March 31, 1999: Tampa Electric Company's first quarter net income of $34.6 million was 27 percent higher than in 1998's first quarter due to growth in retail electric energy sales and the impact of a $5.9- million after-tax charge at the electric division in 1998 discussed in Note D on page 6. Net income, excluding this non-recurring charge, was up 5 percent in 1999's first quarter. Lower interest charges in 1999, the result of lower short-term debt rates and balances, also contributed to higher net income. Operating income of $49.5 million was down 4 percent from that of the same period in 1998 before the non-recurring charge at the electric division, as the growth in retail electric energy sales was offset by weather-related lower demand at both the electric and natural gas divisions in 1999. Electric division operating results Operating income for the electric division was $39.5 million compared with $41.4 million for the same period last year, excluding the one-time after-tax charge of $5.9 million discussed above. Tampa Electric s revenues were $260.9 million for the quarter compared with $273.4 million for the same period last year. Revenues in 1998's first quarter included recognition of $8.7 million of previously deferred revenues associated with the company s current regulatory agreement, partially offset by a stipulated temporary base rate reduction of $4.4 million for the quarter. In accordance with the agreement, the temporary base rate reduction and recognition of previously deferred revenues ended in December 1998. Under this regulatory agreement for 8 FORM 10-Q 1999, $1.4 million of revenues were deferred in the first quarter for refund to customers. Despite warmer winter weather than in last year's period, revenues for the current quarter reflected an increase in retail sales of 2.3 percent, driven by customer growth of 2.5 percent. Interchange sales were lower because of mild winter weather and lower gas prices. Slightly lower operations and maintenance expenses favorably affected quarterly results. On April 8, 1999, an explosion at Tampa Electric's Gannon Station Unit Six, a 375-megawatt generator that was off line for scheduled spring maintenance, resulted in damage to Unit Six, the shut down of the other five units at the Station and injuries to 45 employees and contractors, including three fatalities. The preliminary investigation indicates that the accident occurred as hydrogen, used to cool power generators during normal operations, exploded when an access cover was opened prior to purging the hydrogen from the unit during the Gannon Unit Six maintenance outage. The accident continues to be investigated by the company and the Occupational Safety and Health Administration (OSHA). Gannon Units One, Two, Three and Four were returned to service shortly after the accident; Gannon Unit Five continues to undergo repair and is expected to return to service in May 1999. Gannon Unit Six is expected to be returned to service in early June 1999. Replacement power purchased from neighboring utilities, estimated at $2 million, is expected to be recovered through Tampa Electric's fuel and purchased power clause, with little impact on customer rates. Although the financial impact to Tampa Electric has not been fully determined, the costs resulting from the accident are expected 9 FORM 10-Q to be substantially covered by insurance. The impact on current year operation and maintenance expenses is estimated to be $1-2 million. Peoples Gas System operating results Peoples Gas System reported operating income of $10.0 million for the quarter compared with $10.4 million last year. Revenues for the quarter were $71.1 million compared with $80.7 million for the same period last year. Residential and commercial therm sales were almost 7 percent below last year because of the mild winter weather. Customer growth was 2.9 percent, reflecting Peoples' initiatives to e x pand its market. Lower operations and maintenance expenses, partially offset by higher depreciation, reflected cost savings from restructuring and exiting the appliance sales and service business last year. Interest Charges Interest charges for the first quarter of 1999 were 8 percent lower than in 1998 due to lower short-term debt balances and rates, and lower interest accrued on deferred revenues. YEAR 2000 COMPUTER SYSTEMS READINESS: As discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 1998, the Year 2000 issue exists in two primary areas of Tampa Electric Company's operations: the critical business systems (such as the financial reporting, procurement, payroll and customer information and billing systems) and the control systems (such as those used in the operation of electric generation and 10 FORM 10-Q transmission facilities, and gas and electric distribution facilities). The company began work on Year 2000 readiness in August 1995. The company has completed its assessment of all hardware, software and embedded systems and is currently engaged in renovation, testing and contingency planning. The company's critical control systems (those required for uninterrupted operations) are expected to be ready for the Year 2000 by the middle of 1999. The critical business systems have been substantially renovated and tested. Mainframe integrated system testing has begun and is scheduled to be completed in the first half of 1999. The company's management believes that its transmission and distribution systems, including energy management and control and related embedded systems, are now ready for the Year 2000. Critical systems have been renovated, with the exception of a portion of the Peoples Gas control system, which is scheduled to be fully renovated and tested in the first half of 1999. As part of its Year 2000 project, the company is coordinating with its suppliers and customers with respect to their Year 2000 readiness. At the request of the U. S. Department of Energy (DOE), the North American Electric Reliability Council (NERC) is conducting monthly readiness assessment surveys and coordinating information sharing and contingency planning activities among the member firms. The latest quarterly report was published in April of 1999. The total cost of Year 2000 remediation is expected to be $8-9 million, which includes contracted resources, purchases and internal labor. An estimated breakdown of project costs is as follows: Tampa 11 FORM 10-Q Electric - $6 million and Peoples Gas System - $2.5 million. The company expects to spend approximately $3 million in 1999 for Year 2000 remediation. The company believes the most reasonably likely worst case scenario would be the occurrence of isolated outages of limited duration for utility customers. The utilities have assessed the risk of this scenario, and believe that their contingency efforts, primarily the ability to bypass automated controls, would mitigate the effect of such a scenario. The company's contingency plan is scheduled to be completed by the middle of 1999. The contingency plan will include a team to be established to monitor all critical systems through significant date transitions and to promptly respond to any problems. Forward-Looking Statements The costs of Tampa Electric Company's Year 2000 efforts and the dates on which the company believes it will complete such efforts are based upon management's best estimates, which were derived using numerous assumptions regarding future events, including the continued availability of certain resources, third-party remediation plans and other factors. There can be no assurance that these estimates will prove to be accurate, and actual results could differ materially from those currently projected. Specific factors that could cause such differences include, but are not limited to, the availability and cost of personnel trained in Year 2000 issues, the ability to identify, assess, remediate and test all relevant computer codes and embedded technology and similar uncertainties. 12 FORM 10-Q A more detailed discussion of the Year 2000 issue and its impact on TECO Energy and its subsidiaries, including Tampa Electric Company, is part of TECO Energy's Form 10-Q for the quarter ended March 31, 1999 (Commission File Number 1-8180). Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Tampa Electric Company is exposed to changes in interest rates primarily as a result of its borrowing activities. A hypothetical increase in interest rates of 10 percent of the company's weighted average interest rate on its variable rate debt would not have a significant impact on the company's pretax earnings over the next fiscal year. A hypothetical 10-percent decrease in interest rates would not have a significant impact on the estimated fair value of the company's long-term debt at March 31, 1999. From time to time, the company enters into futures, swaps and option contracts to moderate its exposure to interest rate changes. The benefits of these arrangements are at risk only in the event of non-performance by the other party to the agreement, which the company does not anticipate. The company does not use derivatives or other financial products for speculative purposes. Commodity Price Risk Currently, at Tampa Electric's electric division and at Peoples Gas System, the commodity price increases due to changes in market conditions for fuel, purchased power and natural gas are recovered through cost recovery clauses, with no effect on earnings. 13 FORM 10-Q From time to time, Peoples Gas System enters into futures, swaps and options contracts to limit the effects of natural gas price increases on the prices it charges customers. The benefits of these financial arrangements are at risk only in the event of non- performance by the other party to the agreement, which the company does not anticipate. Tampa Electric Company does not use derivatives or other financial products for speculative purposes. 14 FORM 10-Q PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 12 Ratio of earnings to fixed charges. 27 Financial data schedule - three months ended March 31, 1999. (EDGAR filing only) (b) Reports on Form 8-K The registrant did not file any Current Reports on Form 8-K for the quarter ended March 31, 1999. The registrant filed a Current Report on Form 8-K dated April 27, 1999 reporting under "Item 5. Other Events" the election of Robert D. Fagan as Chief Executive Officer of Tampa Electric Company effective June 1, 1999. 15 FORM 10-Q 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. TAMPA ELECTRIC COMPANY (Registrant) Dated: May 14, 1999 By: /s/G. L. Gillette G. L. Gillette Vice President - Finance and Chief Financial Officer (Principal Financial Officer) 17 FORM 10-Q INDEX TO EXHIBITS Exhibit No. Description of Exhibits Page No. 12 Ratio of earnings to fixed charges 18 27 Financial data schedule - three months ended March 31, 1999 (EDGAR filing only) -- 18 EX-12 2 Exhibit 12 TAMPA ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the company's ratio of earnings to fixed charges for the periods indicated. Three Months Twelve Months Ended Ended Year Ended December 31, March 31, 1999 March 31, 1999 1998 1997 1996(2) 1995(2) 1994(2) 4.37x 4.64x(1) 4.51x(3) 4.38x 4.40x 4.28x 3.88x(4) For the purposes of calculating these ratios, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest on indebtedness, amortization of debt premium, the interest component of rentals and preferred stock dividend requirements. (1) Includes the effect of a fourth quarter 1998 $7.3-million pretax charge at the Electric division associated with a regulatory ruling denying recovery of coal expenses over an established benchmark for coal purchases from an affiliate since 1992. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 4.75x for the 12-month period ended March 31, 1999. (2) Amounts have been restated to reflect the merger of Peoples Gas System, Inc., with and into Tampa Electric Company. (3) Includes the effect of one-time, pretax charges totaling $16.9 million. The effect of these charges was to reduce the ratio of earnings to fixed charges. Had these charges been excluded from the calculation, the ratio of earnings to fixed charges would have been 4.77x for the year ended Dec. 31, 1998. (4) Includes the effect of a $21.3-million pretax restructuring charge. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this non-recurring charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 4.23x for the year ended Dec. 31, 1994. 18 EX-27 3
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TAMPA ELECTIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000096271 Tampa Electric Company 1000000 DEC-31-1999 Mar-31-1999 3-mos PER-BOOK 2,628 8 295 239 0 3,170 119 915 286 1,320 0 0 774 0 0 92 5 0 0 0 979 3,170 332 20 262 282 50 0 50 15 35 0 35 37 10 77 .00 .00
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