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 June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-5007
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 (July 31, 1997):
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. Financial Statements
I n the opinion of management, the unaudited financial
statements include all adjustments necessary to present fairly
the results for the three- and six-month periods ended
June 30, 1997 and 1996. The current year financial statements
include the results of Peoples Gas System, Inc. and West
Florida Natural Gas Company, both of which were merged with
and into Tampa Electric Company in June 1997. Both mergers
were accounted for as pooling of interests. Prior year
financial statements have been restated to reflect the results
of Peoples Gas System. 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, 1996 and to the notes
on pages 7 through 9 of this report.
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FORM 10-Q
BALANCE SHEETS
(in millions)
June 30, Dec. 31,
1997 1996
Assets
Property, plant and equipment,
at original cost
Utility plant in service
Electric $3,580.1 $3,536.6
Gas 456.1 410.4
Construction work in progress 39.8 40.2
4,076.0 3,987.2
Accumulated depreciation (1,533.8) (1,456.7)
2,542.2 2,530.5
Other property 6.1 6.0
2,548.3 2,536.5
Current assets
Cash and cash equivalents 24.8 3.5
Receivables, less allowance
for uncollectibles 180.4 162.0
Inventories, at average cost
Fuel 66.5 57.0
Materials and supplies 44.5 42.9
Prepayments 5.9 4.9
322.1 270.3
Deferred debits
Unamortized debt expense 16.7 18.3
Deferred income taxes 104.5 102.9
Regulatory asset - tax related 43.4 44.8
Other 73.1 53.1
237.7 219.1
$3,108.1 $3,025.9
Liabilities and Capital Capital
Common stock $ 972.0 $ 961.7
Retained earnings 298.5 285.7
1,270.5 1,247.4
Preferred stock, redemption not required 20.0 20.0
Long-term debt, less amount due
within one year 730.0 740.2
2,020.5 2,007.6
Current liabilities
Long-term debt due within one year 3.8 3.7
Notes payable 163.0 98.6
Accounts payable 140.6 153.7
Customer deposits 76.8 77.1
Interest accrued 19.5 15.9
Taxes accrued 40.0 11.9
443.7 360.9
Deferred credits
Deferred income taxes 385.7 382.4
Investment tax credits 52.0 53.8
Regulatory liability - tax related 79.0 80.6
Other 127.2 140.6
643.9 657.4
$3,108.1 $3,025.9
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF INCOME
(in millions)
For the three months ended June 30, 1997 1996
Operating revenues
Electric $300.0 $272.4
Gas 57.1 63.0
357.1 335.4
Operating expenses
Operation
Fuel - electric generation 90.7 90.8
Purchased power 15.7 12.6
Natural gas sold 27.0 32.3
Other 54.4 55.4
Maintenance 21.9 18.3
Depreciation 40.2 33.4
Taxes, federal and state income 22.6 18.7
Taxes, other than income 28.3 27.3
300.8 288.8
Operating income 56.3 46.6
Other income
Allowance for other funds used
during construction .1 5.4
Other income (expense), net (1.0) .1
(.9) 5.5
Income before interest charges 55.4 52.1
Interest charges
Interest on long-term debt 12.9 11.6
Other interest 3.8 4.5
Allowance for borrowed funds
used during construction -- (2.2)
16.7 13.9
Net income 38.7 38.2
Preferred dividend requirements .2 .4
Balance applicable to common stock $ 38.5 $ 37.8
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF INCOME
(in millions)
For the six months ended June 30, 1997 1996
Operating revenues
Electric $572.8 $527.2
Gas 133.9 148.7
706.7 675.9
Operating expenses
Operation
Fuel - electric generation 179.4 187.1
Purchased power 26.5 22.1
Natural gas sold 65.0 77.1
Other 106.5 108.9
Maintenance 40.0 34.0
Depreciation 80.0 66.5
Taxes, federal and state income 43.1 34.6
Taxes, other than income 57.9 56.7
598.4 587.0
Operating income 108.3 88.9
Other income
Allowance for other funds used
during construction .1 10.5
Other income (expense), net (1.3) --
(1.2) 10.5
Income before interest charges 107.1 99.4
Interest charges
Interest on long-term debt 25.7 23.3
Other interest 7.7 8.8
Allowance for borrowed funds
used during construction -- (4.3)
33.4 27.8
Net income 73.7 71.6
Preferred dividend requirements .4 1.3
Balance applicable to common stock $ 73.3 $ 70.3
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF CASH FLOWS
(in millions)
For the six months ended June 30, 1997 1996
Cash flows from operating activities
Net income $ 73.7 $ 71.6
Adjustments to reconcile net income
to net cash:
Depreciation 80.0 66.5
Deferred income taxes (.6) (8.4)
Investment tax credits, net (2.3) (2.3)
Allowance for funds used
during construction (.1) (14.7)
Deferred recovery clause 1.2 6.4
Deferred revenues (17.1) 29.9
Refund to customers (12.1) --
Amortization of coal contract buyout 1.4 1.4
Receivables, less allowance
for uncollectibles (16.4) 7.3
Fuel inventories (11.2) 14.7
Taxes accrued 28.1 8.3
Accounts payable (3.1) (26.7)
Other (14.0) 8.6
107.5 162.6
Cash flows from investing activities
Capital expenditures (66.8) (128.3)
Allowance for funds used
during construction .1 14.7
(66.7) (113.6)
Cash flows from financing activities
Proceeds from contributed capital
from parent 5.0 53.0
Proceeds from long-term debt -- 3.1
Repayment of long-term debt (14.0) (25.3)
Net payments under credit lines (10.0) --
Net increase in short-term debt 62.9 23.5
Dividends (63.4) (70.3)
Redemption of preferred stock,
including premium -- (35.5)
(19.5) (51.5)
Net increase (decrease) in cash
and cash equivalents 21.3 (2.5)
Cash and cash equivalents
at beginning of period 3.5 7.4
Cash and cash equivalents at end of period $ 24.8 $ 4.9
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
A. Tampa Electric Company is a wholly owned subsidiary of
TECO Energy, Inc.
B. On June 16, 1997, TECO Energy, Inc. completed its merger with
Lykes Energy. Concurrent with this merger, Lykes Energy s
regulated gas distribution utility, Peoples Gas System, Inc., was
merged with and into Tampa Electric Company and now operates as its
Peoples Gas division.
On June 30, 1997, TECO Energy completed its merger of West
Florida Gas Inc. (West Florida) in a tax-free, stock-for-stock
transaction. Concurrent with this merger, West Florida s regulated
gas distribution utility, West Florida Natural Gas Company, was
merged with and into Tampa Electric Company and now operates as
part of the Peoples Gas division.
These mergers were accounted for as pooling of interests and,
accordingly, Tampa Electric s Balance Sheet as of June 30, 1997 and
its Statements of Income and Cash Flows for the period ended June
30, 1997 include the results of Peoples Gas System and West Florida
Natural Gas.
The Balance Sheet as of Dec. 31, 1996 and the Statements of
Income and Cash Flows for the periods ended June 30, 1996 have been
restated to include the results of Peoples Gas System. The 1996
statements have not been restated to reflect the operations and
financial position of West Florida Natural Gas due to its size.
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FORM 10-Q
The company's combined restated revenues and net income for
the three- and six-month periods ended June 30, 1997 and 1996 were
as follows:
Combining Results (unaudited)
(millions)
Three Months Ended June 30,
1997 1996
Net Net
Revenues Income Revenues Income
Tampa Electric(1) $300.0 $36.2 $272.4 $36.2
Peoples Gas 54.3 2.8 63.0 2.0
West Florida Gas 2.8 (.1) -- --
$357.1 $38.9 $335.4 38.2
Merger related(2) -- (.2) -- --
Combined $357.1 $38.7 $335.4 $38.2
Six Months Ended June 30,
1997 1996
Net Net
Revenues Income Revenues Income
Tampa Electric(1) $572.8 $64.2 $527.2 $62.1
Peoples Gas 124.0 9.1 148.7 9.5
West Florida Gas 9.9 .6 -- --
$706.7 $73.9 $675.9 $71.6
Merger related(2 -- (.2) -- --
Combined $706.7 $73.7 $675.9 $71.6
(1)
The 1996 amounts are as previously reported on Form 10-Q for
the quarter ended June 30, 1996. (2)
Reflects net after-tax one-time charge for all merger-related
transactions.
C. The company has made certain commitments in connection with
its continuing construction program. Total construction
expenditures for 1997 are estimated to be $117 million for the
electric division and $27 million for the Peoples Gas division.
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FORM 10-Q
D. During the first six months of 1997, the electric division
recognized $17 million of revenues that had been deferred in 1995
and 1996 pursuant to regulatory agreements approved by the Florida
Public Service Commission. The electric division deferred
$30 million of revenues during the first six months of last year.
In addition, it refunded $12 million of previously deferred
revenues to customers during the first six months of this year in
accordance with the agreements.
As of June 30, 1997, $44 million of deferred revenues was
included in other deferred credits. An additional $7 million was
classified as accounts payable to reflect the remaining amount to
be refunded to customers through September 1997.
E. On July 16, 1997, the company retired all of its outstanding
shares of cumulative preferred stock at the applicable per share
redemption prices of $103.75 for Series A, $102.875 for Series B
and $101.00 for Series D.
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FORM 10-Q
Item 2. Management's Narrative Analysis of Results of Operations
Three months ended June 30, 1997:
Net income of $39 million in the second quarter was 1 percent
higher than in 1996's second quarter as increased operating income
more than offset the decline in capitalized financing costs
(AFUDC).
Contributions by operating division
Operating income
(millions) 1997 1996
Electric division $51.4 $42.3
Peoples Gas division 4.9 4.3
$56.3 $46.6
Operating income of $56 million for the second quarter was
higher than in 1996 primarily because of the completion of the Polk
Unit One electric generating plant and its inclusion in rate base
for earnings purposes. The Peoples Gas division contributed to the
increase over 1996 as a result of lower non-fuel operating
expenses.
The electric division s revenues increased 10 percent in this
year s second quarter because $10 million of previously deferred
revenues were recognized under the company s regulatory agreements,
while $9 million of revenues were deferred during the second
quarter of last year under these agreements.
Excluding the effects of deferred revenues, revenues at the
electric division for the quarter increased 3 percent from last
year primarily due to higher retail energy sales. Retail sales
increased 3 percent due to 2.5-percent customer growth and almost 4
percent higher commercial and industrial sales, the result of a
strong local economy.
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FORM 10-Q
Operating expenses for the electric division in the second
quarter were 7 percent higher than in 1996 primarily as a result of
the operation of Polk Unit One.
Total revenues at the Peoples Gas division decreased 9 percent
while non-fuel revenues declined by only 2 percent as commercial
and industrial customers moved from firm gas purchases to
transportation only services. Milder weather in 1997 also
contributed to lower retail gas sales.
The effective income tax rate for the second quarter was
37 percent compared to 33 percent for the same period last year.
The decrease was primarily due to lower AFUDC-other in 1997.
Total AFUDC decreased in 1997 because the electric division s
Polk Unit One began commercial service at the end of 1996's third
quarter.
Interest expense before AFUDC - borrowed funds was 4 percent
higher in the current quarter primarily due to increased levels of
long-term debt.
Description of the Peoples Gas division s business
The Peoples Gas division of Tampa Electric is engaged in the
purchase, distribution and marketing of natural gas for
residential, commercial, industrial and electric power generation
customers wholly in the State of Florida. With more than 230,000
customers, the division has operations in all of Florida s major
metropolitan areas. Its business is generally affected by a number
of market factors, including competition and seasonality.
Gas is purchased for resale to customers under a supply
portfolio which consists mostly of short-term contracts of one year
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FORM 10-Q
or less. The cost of gas purchased and the related interstate
transportation costs are recovered from customers through a
purchased gas adjustment clause, approved by the Florida Public
Service Commission, which provides for full recovery of all
prudently incurred costs.
In some cases, customers elect to purchase natural gas
directly from marketers or producers. In these instances, gas is
delivered to customers for a transportation charge on the
deliveries. The transportation rate charged to customers is
currently the same whether the customer purchases gas from Peoples
Gas division or directly from a marketer or producer.
The Peoples Gas division is not in direct competition with any
other regulated distributors of natural gas for customers within
its service areas. At the present time, the principal form of
competition for residential and small commercial customers is from
companies providing other sources of energy and energy services.
Competition is most prevalent in the large commercial and
industrial markets. In recent years, these classes of customers
have been targeted by companies seeking to sell gas directly either
using Peoples Gas division facilities or transporting gas through
other facilities, thereby bypassing Peoples Gas division
facilities. In response to this competition, various programs have
been developed including the provision of transportation services
at discounted rates.
In general, Peoples Gas division faces competition from other
energy source suppliers offering fuel oil, electricity and in some
cases liquid petroleum gas. Peoples Gas division has taken actions
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FORM 10-Q
to retain and expand its commodity and transportation business,
including managing costs and providing high quality services to
customers.
Peoples Gas division s business is affected by seasonality
because one of the significant markets for natural gas is space
heating. Prices for natural gas also have shown seasonal
fluctuation, with prices lower in the summer than in the winter.
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FORM 10-Q
Six months ended June 30, 1997:
Net income of $74 million in the first half was 3 percent
higher than in 1996's first half as increased operating income more
than offset the decline in AFUDC.
Contributions by operating division
Operating income
(millions) 1997 1996
Electric division $ 93.3 $74.6
Peoples Gas division 15.0 14.4
$108.3 $88.9
Operating income of $108 million was higher than in 1996
primarily because of the completion of the Polk Unit One electric
generating plant and its inclusion in rate base for earnings
purposes. The Peoples Gas division contributed to the increase
over 1996 as a result of lower non-fuel operating expenses and the
addition of the West Florida Natural Gas operations.
The electric division s revenues increased 9 percent in this
year s first half as $17 million of previously deferred revenues
were recognized under the company s regulatory agreements, while
$30 million of revenues were deferred in the same period last year
under these agreements.
Excluding the effects of deferred revenues, first half
revenues at the electric division were essentially unchanged from
last year as retail electric sales were only slightly lower than in
1996. Customer growth of 2.4 percent and 4 percent higher
commercial and industrial sales offset the effects of milder winter
weather on residential sales.
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FORM 10-Q
Operating expenses in the first half for the electric division
were 2 percent higher than in 1996, primarily as a result of the
operation of Polk Unit One.
Total revenues at the Peoples Gas division decreased 10
percent while non-fuel revenues declined by only 4 percent as
commercial and industrial customers moved from firm gas purchases
to transportation only services. Milder winter weather in 1997
also contributed to lower retail gas sales.
The effective income tax rate for the first six months of 1997
was 37 percent compared to 33 percent for the same period last year
primarily due to lower AFUDC-other.
Total AFUDC decreased in 1997 because the Polk Unit One began
commercial service at the end of 1996's third quarter.
Interest expense before AFUDC - borrowed funds was up 4
percent due to higher levels of long-term debt and interest accrued
on the electric division s revenue deferrals.
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FORM 10-Q
Liquidity, Capital Resources and Changes in Financial Condition
Gas plant in service and notes payable increased from year-end
1996 as a result of the addition of West Florida Natural Gas
Company in 1997. Notes payable also increased due to the timing of
cash flows.
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FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. Bylaws of Tampa Electric Company, as amended effective
April 16, 1997.
10. Form of Nonstatutory Stock Option under the TECO Energy, Inc.
1997 Director Equity Plan.
12. Ratio of earnings to fixed charges.
27. Financial data schedule. (EDGAR filing only)
Certain instruments defining the rights of holders of long-
term debt of Tampa Electric Company authorizing a total amount of
securities not exceeding 10 percent of total assets on a
consolidated basis are not filed herewith. Tampa Electric Company
will furnish copies of such instruments to the Securities and
Exchange Commission upon request.
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated
April 16, 1997 reporting under "Item 5. Other Events"
shareholder approval of TECO Energy s 1997 Director Equity
Plan as an amendment and restatement of TECO Energy s 1991
Director Stock Option Plan.
The registrant filed a Current Report on Form 8-K dated
June 16, 1997 reporting under "Item 5. Other Events" the
completion of the merger of Lykes Energy, Inc. with and into
TECO Energy and the contemporaneous merger of Peoples Gas
System, Inc. with and into the registrant.
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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: August 12, 1997 By: /s/ A. D. Oak
A. D. Oak
Vice President - Treasurer
and Chief Financial Officer
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FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
3. Bylaws of Tampa Electric Company, as amended
effective April 16, 1997. 20
10. Form of Nonstatutory Stock Option under the
TECO Energy, Inc. 1997 Director Equity Plan 30
12. Ratio of earnings to fixed charges 32
27. Financial data schedule (EDGAR filing only) --
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