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 May 31, 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 July 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 May 31, 1996
TABLE OF CONTENTS
PART I. Financial Information
(Unaudited, except Condensed Consolidated Balance Sheet at
August 31, 1995)
Condensed Consolidated Balance Sheets at May 31, 1996 and
August 31, 1995
Condensed Consolidated Statements of Earnings for the three, nine
and twelve months ended May 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the nine and
twelve months ended May 31, 1996 and 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
May 31, August 31,
1996 1995
(Unaudited)
(In Thousands)
Utility plant:
Utility plant in service ................ $ 2,455,017 $ 2,366,435
Accumulated depreciation ................ (901,276) (854,015)
Net plant in service ........... 1,553,741 1,512,420
Construction work in progress ........... 60,625 31,026
Net utility plant .............. 1,614,366 1,543,446
Nonutility property and investments .............. 72,449 70,087
Current assets:
Cash and temporary investments .......... 18,007 36,860
Accounts receivable, net ................ 69,385 73,262
Accrual for unbilled revenues ........... 22,833 28,626
Materials and supplies, at average cost . 20,028 21,647
Prepayments and other current assets .... 7,785 10,734
Total current assets ........... 138,038 171,129
Deferred debits .................................. 141,107 124,343
Total assets ................... $ 1,965,960 $ 1,909,005
Continued . . .
See accompanying notes to condensed consolidated financial statements.
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Balance Sheets
Capitalization and Liabilities
May 31, 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 .......................................... 364,576 373,458
Total common shareholders' equity ................. 712,978 720,752
Preferred stock - redemption not required .................. - 72,680
Long-term debt ............................................. 625,204 582,276
Total capitalization .............................. 1,338,182 1,375,708
Current liabilities:
Short-term debt ............................................ 86,078 -
Current maturities of long-term debt ....................... 15,176 276
Accounts payable ........................................... 14,562 12,187
Interest accrued ........................................... 16,895 9,067
Fuel and purchased power expense accrued ................... 41,428 40,164
Taxes accrued .............................................. 12,511 39,757
Dividends payable on common stock .......................... 22,505 22,505
Other current liabilities .................................. 37,043 45,812
Total current liabilities ......................... 246,198 169,768
Deferred credits:
Deferred income taxes ...................................... 364,595 344,794
Unamortized investment tax credits ......................... 5,865 6,053
Other ...................................................... 11,120 12,682
Total deferred credits ............................ 381,580 363,529
Total capitalization and liabilities .............. $1,965,960 $1,909,005
See accompanying notes to condensed consolidated financial statements.
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended
5-31-96 5-31-95 5-31-96 5-31-95 5-31-96 5-31-95
(In Thousands, Except Per Share Amounts)
Operating revenues ................................ $ 225,029 $ 205,187 $ 629,771 $ 574,251 $ 889,602 $ 829,063
Operating expenses:
Operation:
Fuel ............................ 105,659 95,054 289,766 262,702 397,116 380,746
Purchased power ................. 7,009 1,069 11,635 3,399 13,476 4,572
Other ........................... 29,843 25,717 88,036 77,129 118,374 106,990
Maintenance .............................. 10,444 7,261 25,488 23,207 31,320 29,970
Depreciation and amortization ............ 16,497 15,292 49,344 45,871 64,542 60,741
Taxes other than property and
income taxes .................... 4,923 4,389 15,331 14,055 20,398 19,216
Property taxes ........................... 6,068 6,074 17,665 17,935 23,739 23,700
Income taxes (note 2) .................... 12,606 14,294 38,487 36,043 66,317 58,779
Total operating expenses 193,049 169,150 535,752 480,341 735,282 684,714
Operating income .................................. 31,980 36,037 94,019 93,910 154,320 144,349
Other income, net:
Income taxes (note 2) .................... (405) (857) (1,698) (2,074) (3,398) (778)
Other, net ............................... 1,589 2,202 5,167 5,709 10,432 3,179
Total other income, net 1,184 1,345 3,469 3,635 7,034 2,401
Interest charges .................................. 13,286 10,953 36,361 31,270 47,025 41,504
Net earnings ...................................... 19,878 26,429 61,127 66,275 114,329 105,246
Dividends and premiums on cumulative
preferred stock .......................... - 1,219 2,494 3,658 3,713 4,878
Earnings applicable to
common stock ............................. $ 19,878 $ 25,210 $ 58,633 $ 62,617 $ 110,616 $ 100,368
Earnings per common share* ........................ $ 0.49 $ 0.62 $ 1.43 $ 1.53 $ 2.70 $ 2.45
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 $ 1.65 $ 1.65 $ 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)
Nine Months Ended Twelve Months Ended
5-31-96 5-31-95 5-31-96 5-31-95
(In Thousands)
Operating Activities:
Cash received from customers ......................................... $ 628,363 $ 597,886 $ 854,580 $ 831,822
Cash paid to suppliers and employees ................................. (406,982) (384,192) (533,109) (523,734)
Interest paid ........................................................ (29,163) (24,420) (46,833) (39,967)
Income taxes paid .................................................... (47,369) (36,663) (60,794) (47,691)
Taxes other than income taxes paid ................................... (40,390) (35,294) (46,994) (41,391)
Other operating cash receipts and payments, net ...................... (4,612) 4,495 712 13,808
Net cash provided by operating activities ...... 99,847 121,812 167,562 192,847
Investing Activities:
Construction expenditures ............................................ (89,463) (70,501) (113,624) (88,125)
Nonutility property and investments .................................. (2,362) (11,553) (19,028) (14,906)
Acquisitions ......................................................... (29,200) - (29,200) -
Net cash used in investing activities .......... (121,025) (82,054) (161,852) (103,031)
Financing Activities:
Issuance of long-term debt ........................................... 60,000 70,000 66,204 70,000
Retirement of long-term debt ......................................... (2,172) (16,702) (2,350) (17,046)
Change in short-term debt ............................................ 86,078 (14,994) 86,078 (49,000)
Redemption of preferred stock ........................................ (71,572) - (71,572) -
Dividends paid (common and preferred) ................................ (70,009) (71,173) (93,734) (94,898)
Net cash used in financing activities .......... 2,325 (32,869) (15,374) (90,944)
Net Increase (Decrease) in Cash and Temporary Investments ..................... (18,853) 6,889 (9,664) (1,128)
Cash and Temporary Investments at Beginning of Period ......................... 36,860 20,782 27,671 28,799
Cash and Temporary Investments at End of Period ............................... $ 18,007 $ 27,671 $ 18,007 $ 27,671
Reconciliation of Net Earnings to Net Cash Provided
by Operating Activities:
Net earnings ................................................ $ 61,127 $ 66,275 $ 114,329 $ 105,246
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization .................. 49,344 45,871 64,542 60,741
Deferred income taxes and investment tax credits 12,668 8,398 13,737 11,394
Allowance for equity funds used during construction (60) (219) (70) (207)
Cash flows impacted by changes in:
Accounts receivable ............................ 3,877 12,780 (12,808) (716)
Accrual for unbilled revenues .................. 5,793 13,255 (14,770) 3,594
Materials and supplies ......................... 1,619 (1,666) (124) (2,228)
Accounts payable ............................... 2,375 (3,331) 5,592 (779)
Fuel and purchased power expense accrued ....... 1,264 (8,378) 8,922 949
Taxes accrued .................................. (27,246) (10,171) (7,677) 6,105
Liability for refunds to customers ............. (10,325) (1,697) (6,463) 839
Other, net ..................................... (589) 695 2,352 7,909
Net cash provided by operating activities $ 99,847 $ 121,812 $ 167,562 $ 192,847
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 Nine Months Ended Twelve Months Ended
5-31-96 5-31-95 5-31-96 5-31-95 5-31-96 5-31-95
(In Thousands)
Taxes on operating income:
Federal-current ......... $ 7,280 $ 10,675 $ 23,746 $ 26,165 $ 49,175 $ 45,035
Federal-deferred ........ 4,987 3,266 13,286 8,963 14,994 12,195
Investment tax credits... (63) (63) (188) (188) (250) (250)
State-current ........... 402 416 1,643 1,103 2,398 1,799
12,606 14,294 38,487 36,043 66,317 58,779
Taxes on other income:
Federal-current ......... 626 1,097 2,094 2,430 4,367 1,309
Federal-deferred ........ (239) (249) (430) (377) (1,007) (552)
State-current ........... 18 9 34 21 38 21
405 857 1,698 2,074 3,398 778
Total income taxes $ 13,011 $ 15,151 $ 40,185 $ 38,117 $ 69,715 $ 59,557
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 (FERC), and the state public utility
commissions in Texas, Colorado and New Mexico. Requested approvals have been
received from Kansas, Wyoming and the Nuclear Regulatory Commission.
Requisite applications have been filed with the applicable state
jurisdictions, the Securities and Exchange Commission and the FERC and numerous
intervenors have filed in certain of the proceedings. Hearings began in Texas on
June 24, 1996, in Colorado on July 9, 1996, and have been scheduled in New
Mexico for July 22, 1996. On June 26, 1996, the FERC announced a date of January
31, 1997, for an initial decision on the Merger.
The Merger, with a targeted completion date in the spring of 1997, 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 flow through of 100% of the margin 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, which was also denied. On May 24,
1996, the Company filed an appeal in the Travis County District Court on the
PUCT's decision. 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 had been expected to lower fuel costs. On February
7, 1996, the PUCT denied certain rule waivers for rate treatment which were
necessary to complete the purchase. The Company applied for rehearing and on
April 26, 1996, the matter was again denied by the PUCT. No further appeal is
anticipated. Although the Company will not be purchasing TUCO, it is negotiating
alternative options for working with TUCO to provide fuel savings.
(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 May 31, 1996, and the
related condensed consolidated statements of earnings for the three-month,
nine-month and twelve-month periods ended May 31, 1996 and 1995, and cash flows
for the nine-month and twelve-month periods ended May 31, 1996 and 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
July 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 Nine Months Twelve Months
Ended Ended Ended
5-31-96 5-31-96 5-31-96
(Dollars In Thousands)
Estimated effect on revenues of variations in:
Kilowatt-hour (kwh) sales * ................ $ 20,064 $ 43,316 $ 48,565
Rates ...................................... (2,929) (2,154) 5,969
Fuel and purchased power cost recovery ..... 3,551 14,290 9,102
Subtotal .......................... 20,686 55,452 63,636
Non-firm kwh sales ......................... (844) 68 (3,097)
Total revenue increase ............ $ 19,842 $ 55,520 $ 60,539
Increase in kwh sales* (in millions) .............. 506 1,030 1,200
Decrease in non-firm kwh sales (in millions) ...... (198) (403) (600)
*Comprised of retail and wholesale excluding economy and interruptible (non-firm) wholesale kwh sales.
Variations in Kwh Sales. The revenue increases in the nine- 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. Record breaking heat in May 1996 accounted for the increase in
retail and wholesale sales for the quarter and contributed to increases in the
other periods. Improved economic conditions also positively impacted sales for
all periods. Additionally, 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. Revenues decreased in the three- and nine-month
periods due primarily to contractually set demand charges for certain wholesale
customers. Although firm wholesale kwh sales increased, the revenue per kwh sold
decreased due to such contractual demand charges. Revenues increased for the
twelve-month period as a result of greater demand charge revenue 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) for the twelve
months.
Variations in Fuel and Purchased Power Cost Recovery. Revenue increases
are due to higher natural gas prices in all periods while higher coal costs
contributed to the increases in the nine- and twelve-month periods.
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.
Operating Expenses and Non-Operating Items
Fuel and purchased power expense comprised 58.4%, 56.3% and 55.8% of
total operating expenses for the three, nine and twelve months ended May 31,
1996, respectively. When compared to the corresponding periods last year, these
expenses increased $16.5 million or 17.2%, $35.3 million or 13.3% and $25.3
million or 6.6%, respectively. Fuel expense (excluding purchased power expense)
per net kwh generated, increased from 1.81 to 2.02 cents, from 1.76 to 1.93
cents, and from 1.77 to 1.87 cents for the respective three-, nine- and
twelve-month periods because of higher market prices for natural gas in all
periods and greater coal costs in the nine- and twelve-month periods.
Additionally, due to its availability, the Company purchased greater quantities
of low cost economy power.
Total operating expenses, excluding fuel and purchased power, increased
$7.4 million or 10.1%, $20.1 million or 9.4%, and $25.3 million or 8.4%, for the
respective three-, nine- and twelve-month periods. The increases resulted
primarily from an expected increase in merger-related expenses (see OTHER
MATTERS) and from production maintenance expenses resulting from scheduled power
plant repairs. Income taxes were also higher for the nine- and twelve-month
periods.
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
The decline in earnings for the three-and nine-month periods was due
primarily to increased production maintenance expenses, interest charges and
merger-related expenses. Earnings for the twelve-month period reflect income
from increased kilowatt-hour sales which helped offset higher expenses. 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). Current
operating income increased for the nine- and twelve-month periods due primarily
to increased kwh sales to all retail customers and certain wholesale customers,
particularly RECs. The increase in sales to RECs was due primarily to increased
irrigation-related sales, due to below-normal precipitation. Sales to Cap Rock
also contributed to the rise in REC sales for the nine- and twelve-month
periods.
Assuming normal weather conditions, earnings for the 1996 fiscal year
are expected to remain at or slightly below last year's level (excluding the 13
cents and 11 cents per share described above). 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 Company expects the sale to
close in fiscal 1996.
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, nine and twelve months ended May 31, 1996, were
$25.1 million, $89.5 million and $113.6 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. 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 redeem and purchase the Preferred Stock discussed below).
An additional unbudgeted cash requirement of $32 million is expected
in 1997 for a 100 MW gas turbine to be installed with an anticipated startup
date in the summer of 1997.
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 redemption and purchase 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 filed a
shelf registration on June 4, 1996, under which $220 million of First Mortgage
Bonds and/or preferred stock and/or unsecured debt securities are available for
issuance. On June 5, 1996, the Company filed a shelf registration covering $100
million of trust preferred securities which has not yet become effective.
In June 1996 the New Mexico Public Utility Commission approved the
Company's application to contribute $90 million of additional capital to Quixx.
These funds will be limited to $15 million per year for six years and will be
used to continue the investment in and development of independent power
projects.
At May 31, 1996, the Company maintained committed bank lines of credit
aggregating $180 million, under which there were no borrowings outstanding. At
May 31, 1996, the Company had approximately $87 million of commercial paper
outstanding.
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). 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 spring of 1997.
However, settlement with all parties before the issues go to hearing could
result in an earlier completion. 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 consummation of the
Merger.
PART II. OTHER INFORMATION
Item 5. Other Information.
The Company's ratio of earnings to fixed charges for the twelve months
ended May 31, 1996, was 4.59. The ratio of earnings to fixed charges and
preferred dividend requirements combined was 4.11 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 May 31, 1996
15 Letter of Deloitte & Touche LLP regarding unaudited
condensed consolidated interim financial information
(b) Reports on Form 8-K:
None
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: July 12, 1996