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, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-5007
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, 1998):
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
In the opinion of management, the unaudited financial statements
include all adjustments necessary to present fairly the results
for the three-month periods ended March 31, 1998 and 1997. The
1997 financial statements include the results of Peoples Gas
System, Inc., and West Florida Natural Gas Company, both of which
were merged into Tampa Electric Company in June 1997. Both
mergers were accounted for as poolings of interests. 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, 1997 and
to the notes on pages 6 through 8 of this report.
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FORM 10-Q
BALANCE SHEETS
(in millions)
March 31, Dec. 31,
1998 1997
Assets
Property, plant and equipment,
at original cost
Utility plant in service
Electric $3,652.6 $3,632.0
Gas 481.2 471.1
Construction work in progress 42.2 40.6
4,176.0 4,143.7
Accumulated depreciation (1,630.2) (1,595.3)
2,545.8 2,548.4
Other property 6.8 6.5
2,552.6 2,554.9
Current assets
Cash and cash equivalents 1.3 2.8
Receivables, less allowance
for uncollectibles 127.8 161.4
Inventories, at average cost
Fuel 83.2 69.5
Materials and supplies 46.0 45.6
Prepayments 6.8 7.3
265.1 286.6
Deferred debits
Unamortized debt expense 17.0 17.5
Deferred income taxes 113.1 112.2
Regulatory asset - tax related 41.2 41.8
Other 81.2 85.9
252.5 257.4
$3,070.2 $3,098.9
Liabilities and Capital
Capital
Common stock $1,012.1 $ 972.1
Retained earnings 283.1 289.6
1,295.2 1,261.7
Long-term debt, less amount due
within one year 726.7 727.1
2,021.9 1,988.8
Current liabilities
Long-term debt due within one year 4.2 4.1
Notes payable 140.6 219.1
Accounts payable 105.6 118.4
Customer deposits 78.1 77.3
Interest accrued 25.8 18.7
Taxes accrued 16.6 8.5
370.9 446.1
Deferred credits
Deferred income taxes 423.9 415.6
Investment tax credits 48.5 49.7
Regulatory liability - tax related 75.8 77.0
Other 129.2 121.7
677.4 664.0
$3,070.2 $3,098.9
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 March 31, 1998 1997
Operating revenues
Electric $273.4 $272.8
Gas 80.7 76.8
354.1 349.6
Operating expenses
Operation
Fuel - electric generation 89.1 88.7
Purchased power 11.3 10.8
Natural gas sold 38.0 38.0
Other 51.2 52.2
Maintenance 21.8 18.0
Non-recurring charge 9.6 --
Depreciation 41.3 39.9
Taxes, federal and state income 16.1 20.5
Taxes, other than income 29.8 29.6
308.2 297.7
Operating income 45.9 51.9
Other income
Allowance for other funds used
during construction -- .1
Other income (expense), net (1.9) (.3)
(1.9) (.2)
Income before interest charges 44.0 51.7
Interest charges
Interest on long-term debt 12.2 12.7
Other interest 4.6 4.0
16.8 16.7
Net income 27.2 35.0
Preferred dividend requirements -- .2
Balance applicable to common stock $ 27.2 $ 34.8
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 three months ended March 31, 1998 1997
Cash flows from operating activities
Net income $ 27.2 $ 35.0
Adjustments to reconcile net income
to net cash:
Depreciation 41.3 39.9
Deferred income taxes 7.2 (5.5)
Investment tax credits, net (1.2) (1.2)
Allowance for funds used
during construction -- (.1)
Deferred recovery clause 4.2 1.2
Deferred revenue (8.7) (7.3)
Refund to customers -- (5.9)
Non-recurring charge 9.6 --
Receivables, less allowance
for uncollectibles 33.6 31.6
Inventories (14.1) (6.7)
Taxes accrued 8.1 2.9
Accounts payable (12.8) 8.4
Other 16.1 (.6)
110.5 91.7
Cash flows from investing activities
Capital expenditures (39.4) (31.3)
Allowance for funds used
during construction -- .1
(39.4) (31.2)
Cash flows from financing activities
Proceeds from contributed capital
from parent 40.0 --
Repayment of long-term debt (.3) (.3)
Net decrease in short-term debt (78.5) (17.7)
Dividends (33.8) (37.0)
(72.6) (55.0)
Net increase (decrease) in cash
and cash equivalents (1.5) 5.5
Cash and cash equivalents at
beginning of period 2.8 3.5
Cash and cash equivalents at end of period $ 1.3 $ 9.0
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. In June 1997, TECO Energy completed its mergers with Lykes
Energy, Inc. (the Peoples companies) and West Florida Gas Inc. (West
Florida). Concurrent with these mergers, the regulated natural gas
distribution utilities acquired began operating as the Peoples Gas
System division of Tampa Electric Company.
These mergers were accounted for as poolings of interests and,
accordingly, Tampa Electric Company's financial statements for 1997
include the results of Peoples Gas System.
The company's combined restated revenues and net income for the
three-month period ended March 31, 1997 were as follows:
Combining Results
(unaudited)
Three Months Ended
March 31, 1997
Net
(millions) Revenues Income
Tampa Electric pre-merger (1) $272.8 $27.9
Peoples Gas System pre-merger 69.7 6.4
West Florida Gas pre-merger 7.1 .7
Combined $349.6 $35.0
(1) The 1997 amounts were previously reported on Form 10-Q for the
quarter ended March 31, 1997.
C. The company has made certain commitments in connection with its
continuing construction program. Total construction expenditures
during 1998 are estimated to be $128 million for the electric division
and $59 million for Peoples Gas System.
D. D u ring the first quarter of 1998, the electric division
recognized $8.7 million of revenues that had been deferred in 1995 and
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FORM 10-Q
1996 pursuant to regulatory agreements approved by the Florida Public
Service Commission (FPSC). During the first three months of last
year, the electric division recognized $7.3 million of revenues
previously deferred and refunded $5.9 million to customers under these
agreements.
As of March 31, 1998, $22.6 million of deferred revenues were
included in other deferred credits. Accrued interest on these deferred
revenues was $8.5 million at March 31, 1998.
Effective Oct. 1, 1997, electric customers began receiving a $25-
million temporary base rate reduction over a 15-month period pursuant
to the same agreements.
E. In June 1997, the Financial Accounting Standards Board issued
Financial Accounting Standards (FAS) 130, Reporting Comprehensive
Income, effective for fiscal periods beginning after Dec. 15, 1997.
The new standard requires that comprehensive income, which includes
net income as well as certain changes in assets and liabilities
recorded in common equity, be reported in the financial statements.
For the three-month periods ended March 31, 1998 and 1997, there were
no components of comprehensive income other than net income.
F. As discussed in Tampa Electric Company's 1997 Annual Report on
Form 10-K, the FPSC in September 1997 ruled that costs associated with
two Tampa Electric long-term wholesale power sales contracts should be
assigned to the wholesale jurisdiction and that for retail rate making
purposes the costs transferred from retail to wholesale should reflect
average costs rather than the lower incremental costs on which the two
contracts are based. As a result of this decision and the related
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FORM 10-Q
reduction of the retail rate base upon which Tampa Electric is allowed
to earn a return, these contracts became uneconomic. One contract was
terminated in 1997. Tampa Electric has entered into firm power
purchase contracts for the balance of its obligation with other
electric power suppliers for replacement power through 1999. The cost
of power under the replacement contracts exceeds the revenues expected
from the remaining contract. As a result, Tampa Electric recorded a
one-time $5.9-million after-tax charge in the first quarter of 1998.
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FORM 10-Q
Item 2. Management's Narrative Analysis of Results of Operations
Three months ended March 31, 1998:
Net income for the three-month period ended March 31, 1998,
including a non-recurring after-tax charge of $5.9 million, was $27.2
million, compared to $35.0 million for the same period last year.
In 1998's first quarter, the electric division recorded a charge
associated with actions to mitigate the effects of the 1997 FPSC
ruling that separated certain wholesale power sales contracts from the
retail jurisdiction through 1999.
Operating income for the quarter of $51.8 million, excluding the
charge discussed above and on page 9, was unchanged from 1997's first
quarter as the effect of increased therm sales at Peoples Gas System
was partially offset by increased depreciation expense at the electric
division, the result of higher plant balances.
Contributions by operating division
Operating income
(millions) 1998 1997
Electric division (1) $ 41.4 $ 41.8
Peoples Gas System 10.4 10.1
51.8 51.9
Non-recurring charge, after tax (5.9) --
$ 45.9 $ 51.9
(1) Operating income for 1998 excludes the after-tax non-recurring
charge discussed above and on page 9.
Electric division
Operating revenues for the quarter were unchanged from 1997, as
the adverse effect of unusual weather and the impact of the temporary
base rate reduction discussed in Note D on page 7 was offset by
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FORM 10-Q
customer growth of 2.1 percent. Retail energy sales were unchanged
from the prior year's period.
Depreciation expense increased in the current year's first
quarter as a result of higher plant balances. Operations and
maintenance expenses were unchanged from the prior year's period.
As discussed in Note F on pages 7 and 8, Tampa Electric recorded
a one-time $5.9-million after-tax charge in the first quarter of 1998
related to the 1997 FPSC ruling that separated certain wholesale power
sales contracts from the retail jurisdiction through 1999.
Peoples Gas System
At Peoples Gas System, operating income was three percent higher
in the first quarter of 1998.
Total revenues were up five percent from 1997's first quarter,
with residential and commercial natural gas sales (therms) eight
percent higher than in last year's first quarter due to customer
growth and increased usage.
Derivatives and Hedging Policy
Peoples Gas System enters into futures, swaps and options
contracts, from time to time, to limit the effects of natural gas
price increases on the prices it charges customers.
Tampa Electric Company does not use derivatives or other
financial products for speculative purposes.
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FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 TECO Energy, Inc., Annual Incentive Compensation Plan, as amended
and restated as of April 15, 1998.
10.2 Agreement and General Release between Tampa Electric Company and
Keith S. Surgenor dated March 20, 1998.
12. Ratio of earnings to fixed charges.
27.1 Financial data schedule - three months ended March 31, 1998.
(EDGAR filing only)
27.2 Restated financial data schedule - three months ended March 31,
1997. (EDGAR filing only)
(b) No reports on Form 8-K were filed during the quarter to which
this report relates.
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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: May 14, 1998
By: /s/ W. L. Griffin
W. L. Griffin
Vice President - Controller
(Principal Accounting Officer)
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FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
10.1 TECO Energy, Inc., Annual Incentive Compensation 14
Plan, as amended and restated as of April 15,
1998.
10.2
Agreement and General Release between Tampa 17
Electric Company and Keith S. Surgenor dated
March 20, 1998.
12. Ratio of earnings to fixed charges 26
27.1 Financial data schedule - three months ended
March 31, 1998 (EDGAR filing only) --
27.2 Restated financial data schedule - three months
ended March 31, 1997 (EDGAR filing only) --
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