UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
(X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
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: 1-8847
TNP ENTERPRISES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1907501
----------- ----------------
(State of incorporation) (I.R.S. employer identification number)
4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113
-----------------------------------------------------------------
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code 817-731-0099
------------
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 \ \
TNP Enterprises, Inc. has no publicly traded shares of common stock outstanding.
- -------------------------------------------------------------------------------
Commission File Number: 2-97230
TEXAS-NEW MEXICO POWER COMPANY
----------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-0204070
----------- ----------------
(State of incorporation) (I.R.S. employer identification number)
4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113
-----------------------------------------------------------------
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code 817-731-0099
------------
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 \ \
TNP Enterprises, Inc. holds all 10,705 outstanding common shares of Texas-New
Mexico Power Company.
TNP Enterprises, Inc. And Subsidiaries
Texas New-Mexico Power Company And Subsidiaries
Combined Quarterly Report on Form 10-Q for the period ended March 31, 2000
This Combined Quarterly Report on Form 10-Q is filed separately by TNP
Enterprises, Inc., and Texas-New Mexico Power Company. Texas-New Mexico Power
Company makes no representation as to information relating to TNP Enterprises,
Inc., except as it may relate to Texas-New Mexico Power Company, or to any other
affiliate or subsidiary of TNP Enterprises, Inc.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
TNP Enterprises, Inc. (TNP) and Subsidiaries:
Consolidated Statements of Income
Three Month Periods Ended March 31, 2000, and 1999 3
Consolidated Statements of Cash Flows
Three Month Periods Ended March 31, 2000, and 1999 4
Consolidated Balance Sheets
March 31, 2000, and December 31, 1999 5
Texas-New Mexico Power Company (TNMP) and Subsidiaries:
Consolidated Statements of Income
Three Month Periods Ended March 31, 2000, and 1999 6
Consolidated Statements of Cash Flows
Three Month Periods Ended March 31, 2000, and 1999 7
Consolidated Balance Sheets
March 31, 2000, and December 31, 1999 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 16
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings. 20
Item 6. Exhibits and Reports on Form 8-K. 20
(a) Exhibit Index 20
(b) Reports on Form 8-K 20
Statement Regarding Forward Looking Information 20
Signature page 21
-2-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
---------- ----------
(In thousands)
OPERATING REVENUES $ 124,526 $ 118,125
---------- ----------
OPERATING EXPENSES:
Purchased power and fuel 59,550 57,372
Other operating and maintenance 24,158 23,825
Depreciation 10,230 9,974
Charge for recovery of stranded plant 1,629 3,750
Taxes other than income taxes 7,941 8,000
Income taxes 3,579 712
---------- ----------
Total operating expenses 107,087 103,633
---------- ----------
NET OPERATING INCOME 17,439 14,492
---------- ----------
OTHER INCOME:
Other income and deductions, net 465 163
Income taxes (131) 118
---------- ----------
Other income, net of taxes 334 281
---------- ----------
INCOME BEFORE INTEREST CHARGES 17,773 14,773
---------- ----------
INTEREST CHARGES:
Interest on long-term debt 9,626 10,224
Other interest and amortization
of debt-related costs 888 1,417
---------- ----------
Total interest charges 10,514 11,641
---------- ----------
NET INCOME 7,259 3,132
Dividends on preferred stock and other 5 36
---------- ----------
INCOME APPLICABLE TO COMMON STOCK $ 7,254 $ 3,096
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
-----------------------------------
2000 1999
--------- ---------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers $ 102,091 $ 105,835
Purchased power and fuel costs paid (63,613) (62,523)
Cash paid for payroll and to other suppliers (24,234) (27,935)
Interest paid, net of amounts capitalized (14,690) (11,577)
Income taxes refunded 5,500 4,000
Other taxes paid (17,089) (18,147)
Other operating cash receipts and payments, net 147 181
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (11,888) (10,166)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (9,200) (11,592)
Withdrawals from escrow account - 1,902
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (9,200) (9,690)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks (3,926) (3,906)
Common stock issuances 1,202 3,091
Borrowings from (repayments to) revolving credit
facilities - net 21,000 (27,500)
Issuances:
Senior notes, net of discount - 174,164
Deferred expenses associated with financings - (1,280)
Redemptions:
Secured debentures - (130,000)
Preferred stock, net of gain (117) -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,159 14,569
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,929) (5,287)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,456 12,216
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,527 $ 6,929
========= =========
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
Net income $ 7,259 $ 3,132
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 10,230 9,974
Charge for recovery of stranded plant 1,629 3,750
Purchased power settlement adjustment (2,425) -
Amortization of debt-related costs and
other deferred charges 957 1,881
Allowance for funds used during construction (82) (78)
Deferred income taxes 2,541 (2,126)
Investment tax credits (401) 678
Deferred purchased power and fuel costs (2,535) (587)
Cash flows impacted by changes in current assets
and liabilities:
Accounts payable (2,740) (6,858)
Accrued interest (4,990) (1,071)
Accrued taxes (1,991) (5,369)
Reserve for customer refund 838 (8,511)
Changes in other current assets and liabilities (20,560) (4,818)
Other, net 382 (163)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (11,888) $ (10,166)
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
-4-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 December 31,
(Unaudited) 1999
----------- -----------
(In thousands)
ASSETS
- ------
UTILITY PLANT:
Electric plant $ 1,293,744 $ 1,288,104
Construction work in progress 4,093 2,501
----------- -----------
Total 1,297,837 1,290,605
Less accumulated depreciation 390,203 382,627
----------- -----------
Net utility plant 907,634 907,978
----------- -----------
OTHER PROPERTY AND INVESTMENTS, at cost 4,243 4,243
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 11,527 14,456
Accounts receivable 9,405 8,384
Inventories, at lower of average cost or market:
Fuel 1,235 575
Materials and supplies 3,896 3,834
Other current assets 614 939
----------- -----------
Total current assets 26,677 28,188
----------- -----------
LONG-TERM AND OTHER ASSETS:
Recoverable stranded costs 19,029 19,256
Deferred purchased power and fuel costs 24,332 21,797
Deferred charges 18,775 19,737
----------- -----------
Total long-term and other assets 62,136 60,790
----------- -----------
$ 1,000,690 $ 1,001,199
=========== ===========
CAPITALIZATION AND LIABILITIES
- ------------------------------
CAPITALIZATION:
Common shareholders' equity:
Common stock - no par value per share.
Authorized 50,000,000 shares; issued
13,445,494 shares in 2000 and
13,416,556 in 1999 $ 197,887 $ 196,685
Retained earnings 133,771 130,425
----------- -----------
Total common shareholders' equity 331,658 327,110
Redeemable cumulative preferred stock 1,534 1,664
Long-term debt, less current maturities 361,264 340,244
----------- -----------
Total capitalization 694,456 669,018
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt 100,000 100,000
Accounts payable 17,560 20,300
Accrued interest 3,430 8,420
Accrued taxes 10,827 12,818
Customers' deposits 3,890 3,786
Accumulated deferred income taxes 8,321 7,543
Reserve for customer refund 1,520 682
Other current liabilities 10,583 29,720
----------- -----------
Total current liabilities 156,131 183,269
----------- -----------
LONG-TERM AND OTHER LIABILITIES:
Regulatory tax liabilities 6,509 6,633
Accumulated deferred income taxes 98,973 97,196
Accumulated deferred investment tax credits 23,578 23,978
Deferred credits 21,043 21,105
----------- -----------
Total long-term and other liabilities 150,103 148,912
----------- -----------
COMMITMENTS AND CONTINGENCIES
----------- -----------
$ 1,000,690 $ 1,001,199
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
-5-
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF TNP ENTERPRISES, INC.)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
--------------------------------------
2000 1999
--------- ---------
(In thousands)
OPERATING REVENUES $ 124,512 $ 118,111
--------- ---------
OPERATING EXPENSES:
Purchased power and fuel 59,550 57,372
Other operating and maintenance 23,607 23,023
Depreciation 10,230 9,974
Charge for recovery of stranded plant 1,629 3,750
Taxes other than income taxes 7,822 7,879
Income taxes 3,627 1,044
--------- ---------
Total operating expenses 106,465 103,042
--------- ---------
NET OPERATING INCOME 18,047 15,069
--------- ---------
OTHER INCOME:
Other income and deductions, net 330 73
Income taxes (131) 142
--------- ---------
Other income, net of taxes 199 215
--------- ---------
INCOME BEFORE INTEREST CHARGES 18,246 15,284
--------- ---------
INTEREST CHARGES:
Interest on long-term debt 9,595 10,054
Other interest and amortization
of debt-related costs 888 1,417
--------- ---------
Total interest charges 10,483 11,471
--------- ---------
NET INCOME 7,763 3,813
Dividends on preferred stock and other 5 36
--------- ---------
INCOME APPLICABLE TO COMMON STOCK $ 7,758 $ 3,777
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
-6-
TEXAS-NEW MEXICO POWER COMPANY, INC. AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
-----------------------------------
2000 1999
--------- ---------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers $ 102,460 $ 105,001
Purchased power and fuel costs paid (63,613) (62,523)
Cash paid for payroll and to other suppliers (23,538) (22,504)
Interest paid, net of amounts capitalized (14,626) (11,447)
Income taxes refunded 4,508 4,000
Other taxes paid (17,146) (18,089)
Other operating cash receipts and payments, net 13 158
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (11,942) (5,404)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (9,200) (11,692)
Withdrawals from escrow account - 1,902
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES (9,200) (9,790)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks (18) (36)
Borrowings from (repayments to) revolving
credit facilities - net 21,000 (31,000)
Issuances:
Senior notes, net of discount - 174,164
Deferred expenses associated with financings - (1,280)
Redemptions:
Secured debentures - (130,000)
Preferred stock, net of gain (117) -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,865 11,848
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (277) (3,346)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,002 7,977
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,725 $ 4,631
========= =========
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
Net income $ 7,763 $ 3,813
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 10,230 9,974
Charge for recovery of stranded plant 1,629 3,750
Purchased power settlement adjustment (2,425) -
Amortization of debt-related costs and
other deferred charges 957 1,881
Allowance for funds used during construction (82) (78)
Deferred income taxes 1,980 (2,125)
Investment tax credits (401) 894
Deferred purchased power and fuel costs (2,535) (587)
Cash flows impacted by changes in current assets
and liabilities:
Accounts payable (2,662) (6,310)
Accrued interest (4,958) (1,112)
Accrued taxes (2,635) (4,075)
Reserve for customer refund 838 (8,511)
Changes in other current assets and liabilities (20,186) (3,048)
Other, net 545 (130)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (11,942) $ (5,404)
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
-7-
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF TNP ENTERPRISES, INC.)
CONSOLIDATED BALANCE SHEETS
March 31, 2000 December 31,
(Unaudited) 1999
----------- -----------
(In thousands)
ASSETS
- ------
UTILITY PLANT:
Electric plant $ 1,293,720 $ 1,288,080
Construction work in progress 4,093 2,501
----------- -----------
Total 1,297,813 1,290,581
Less accumulated depreciation 390,203 382,627
----------- -----------
Net utility plant 907,610 907,954
----------- -----------
OTHER PROPERTY AND INVESTMENTS, at cost 213 213
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 3,725 4,002
Accounts receivable 6,985 6,347
Inventories, at lower of average cost or market:
Fuel 1,235 575
Materials and supplies 3,897 3,834
Other current assets 438 660
----------- -----------
Total current assets 16,280 15,418
----------- -----------
LONG-TERM AND OTHER ASSETS:
Recoverable stranded costs 19,029 19,256
Deferred purchased power and fuel costs 24,332 21,797
Deferred charges 18,714 19,757
----------- -----------
Total long-term and other assets 62,075 60,810
----------- -----------
$ 986,178 $ 984,395
=========== ===========
CAPITALIZATION AND LIABILITIES
- ------------------------------
CAPITALIZATION:
Common shareholders' equity:
Common stock - $10 par value per share
Authorized 12,000,000 shares;
issued 10,705 shares
$ 107 $ 107
Capital in excess of par value 222,149 222,149
Retained earnings 98,061 90,302
----------- -----------
Total common shareholders' equity 320,317 312,558
Redeemable cumulative preferred stock 1,534 1,664
Long-term debt, less current maturities 361,264 340,244
----------- -----------
Total capitalization 683,115 654,466
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt 100,000 100,000
Accounts payable 17,412 20,074
Accrued interest 3,430 8,388
Accrued taxes 11,554 14,189
Customers' deposits 3,890 3,786
Accumulated deferred income taxes 9,321 8,434
Reserve for customer refund 1,520 682
Other current liabilities 8,864 28,015
----------- -----------
Total current liabilities 155,991 183,568
----------- -----------
LONG-TERM AND OTHER LIABILITIES:
Regulatory tax liabilities 6,509 6,633
Accumulated deferred income taxes 96,381 95,165
Accumulated deferred investment tax credits 23,578 23,978
Deferred credits 20,604 20,585
----------- -----------
Total long-term and other liabilities 147,072 146,361
----------- -----------
COMMITMENTS AND CONTINGENCIES
----------- -----------
$ 986,178 $ 984,395
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
-8-
TNP Enterprises Inc. and Subsidiaries
Texas-New Mexico Power Company and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Interim Financial Statements
The interim consolidated financial statements of TNP and subsidiaries, and
TNMP and subsidiaries, are unaudited and contain all adjustments (consisting
primarily of normal recurring accruals) necessary for a fair statement of the
results for the interim periods presented. Results for interim periods are not
necessarily indicative of results to be expected for a full year or for
previously reported periods due in part to seasonal revenue fluctuations. It is
suggested that these consolidated financial statements be read in conjunction
with the audited consolidated financial statements and notes thereto included in
TNP's and TNMP's 1999 Combined Annual Report on Form 10-K.
Prior period statements have been reclassified in order to be consistent
with current period presentation. The reclassification had no effect on net
income or common shareholders equity.
Note 2. Acquisition
On March 14, 2000, the process of obtaining needed approvals for the Merger
was completed. On April 7, 2000, ST Acquisition Corp., a Texas corporation (ST
Corp.) merged with and into TNP, the parent of TNMP. Upon closing, each
outstanding share of TNP's common stock that was outstanding at the effective
time of the merger was automatically converted into the right to receive $44.00
in cash. Prior to the merger, TNP common stock was traded on the New York Stock
Exchange. As a result of the Merger, TNP is no longer publicly held.
The merger occurred pursuant to an Agreement and Plan of Merger (Merger
Agreement) dated May 24, 1999, between TNP, ST Corp. and SW Acquisition, L.P.
("SW Acquisition"), the parent of ST Corp. TNP is the surviving corporation in
the Merger. SW Acquisition now holds all outstanding common stock of TNP.
SW Acquisition and ST Corp. funded the merger as follows (in millions):
Sources of funding:
-------------------
Equity contribution to ST Corp. by SW Acquisition $ 100.0
Sale of 100,000 shares of senior preferred stock by ST Corp. 100.0
Borrowings from senior secured credit facility by ST Corp. 160.0
Issuance of senior subordinated notes by ST Corp. 275.0
Cash on hand (TNP) 5.3
--------
Total $ 640.3
========
Uses of funding:
---------------
Payment of Merger consideration $ 591.6
Costs and expenses related to Merger 48.7
--------
Total $ 640.3
========
The senior preferred stock was issued in a private placement under a bridge
preferred stock commitment. Until the bridge preferred stock is replaced with a
permanent issuance of senior preferred stock, it will accrue dividends at a rate
based off of LIBOR, with the initial dividend rate set at 13.28%. If the senior
preferred stock has not been replaced by July 7, 2000, the dividend rate will
increase by an additional 100 basis points. Further delays in permanently
placing the stock will cause the dividend rate to increase an additional 50
basis points on October 5, 2000 and January 3, 2001, with the rate being fixed
at 18% beginning April 8, 2001. TNP intends to replace the bridge preferred
stock with a senior preferred stock that pays an in-kind dividend. The
borrowings from the senior secured credit facility include a $160 million term
loan due in 2006. The term loan bears interest at a variable rate that is
currently 9.21%. The senior secured credit facility is secured by a pledge of
all TNMP common stock held by TNP. The senior subordinated notes were issued
through a private offering, bear interest at 10.25% per year, and mature in
2010.
In connection with the Merger, TNMP entered into a Backstop Credit Facility
(Backstop Facility) in the amount of $240 million on April 17, 2000. The
Backstop Facility will provide financing for TNMP to repurchase up to $100
million of its 9.25% Series U first mortgage bonds and up to $140 million of its
10.75% Series A Secured Debentures. As required by its first mortgage bond and
secured debenture indentures, TNMP must offer to repurchase this debt at 101
percent of par value due to the change in control of TNP resulting from the
Merger. TNMP made such an offer in late April 2000, and holders have until May
24, 2000, to respond. Payment on tendered bonds and debentures shall be made
within five business days of the offer's expiration.
-9-
The Merger is to be accounted for under the purchase method of accounting.
In accordance with the purchase method of accounting, the purchase price will be
allocated to the acquired assets and assumed liabilities based on their fair
values and the unallocated amount will be recorded as goodwill. The process of
determining the fair value of assets and liabilities is underway, and the final
results will not be completed until certain information about pre-acquisition
contingencies is assessed. The most significant items to be determined include
the appropriate value to assign to TNP's sole generating plant and the amount of
regulatory assets to be recorded for recovery of stranded costs as permitted by
Texas legislation.
The following condensed unaudited pro forma consolidated balance sheet
shows the effect of the Merger closing as if it had occurred on March 31, 2000.
The condensed unaudited pro forma consolidated statements of income and loss
show the effects of the Merger closing as if it had occurred on January 1, 2000
and 1999, respectively. These pro forma financial statements are based on a
preliminary estimate of the fair value of assets acquired and liabilities
assumed in connection with the Merger. These results are not necessarily
indicative of actual results that would have occurred had the Merger closed at
the beginning of the periods presented. Further, the pro forma results are not
intended to be a projection of future results of operations. A substantial
portion of TNMP's earnings occur during the second and third quarters of the
year, which include the periods of peak electricity usage in the TNMP service
territory.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(UNAUDITED)
Pro Forma Pro Forma
Actual Adjustment Balance
------------- ----------- ------------
(in thousands)
Assets
- ------------------------------------------
Net utility plant $ 907,634 $ - (1) $ 907,634
Other property and investments, at cost 4,243 - 4,243
Current assets 26,677 (5,343) (7) 21,334
Long-term and other assets
Recoverable stranded costs 19,029 - (1) 19,029
Deferred charges 18,775 299,960 (2) 318,735
Other 24,332 - 24,332
------------- ----------- ------------
$ 1,000,690 $ 294,617 $ 1,295,307
============= =========== ============
Capitalization and Liabilities
- ------------------------------------------
Common stock $ 197,887 $ (104,574) (3) $ 93,313
Retained earnings 133,771 (133,771) (4) -
Preferred stock 1,534 100,000 (5) 101,534
Long-term debt, less current maturities 361,264 435,000 (6) 796,264
------------- ----------- ------------
Total capitalizaton 694,456 296,655 991,111
Current liabilities 156,131 (2,038) (8) 154,093
Long-term and other liabilities 150,103 - 150,103
------------- ----------- ------------
$ 1,000,690 $ 294,617 $ 1,295,307
============= =========== ============
Adjustments:
(1) TNP is currently assessing the fair value of TNP One and its other
assets as required by the purchase method of accounting.
-10-
(2) Adjustment to record goodwill and other deferred charges resulting
from the merger. The amount is calculated as follows:
Merger consideration paid $ 591,602
Direct expenses 22,865
Less: estimated fair value of assets acquired, net of liabilities assumed 327,873
---------
Goodwill 286,594
Capitalized financing fees 13,366
---------
$ 299,960
=========
(3) Adjustment to eliminate TNP equity and record $100 million equity
contribution from SW Acquisition, less preferred stock issuance
costs of $6.7 million.
(4) Adjustment to eliminate TNP retained earnings.
(5) Adjustment to record issuance of $100 million of senior preferred
stock by ST Corp.
(6) Adjustment to reflect issuance of debt related to the Merger as
follows:
Senior secured credit facility $ 160,000
Senior subordinated notes 275,000
---------
$ 435,000
=========
(7) Reflects the net cash effect from the preceding pro forma
adjustments.
(8) Tax effects related to certain goodwill items.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Pro Forma Pro Forma
Actual Adjustment Balance
------------- ----------- ------------
(in thousands)
Operating revenues $ 124,526 $ - $ 124,526
------------- ----------- ------------
Operations and maintenance expense 83,708 439 (1) 84,147
Depreciation and amortization 10,230 2,866 (2) 13,096
Income taxes 3,579 (4,062) (3) (483)
Other operating expenses 9,570 - 9,570
------------- ----------- ------------
Total operating expenses 107,087 (757) (106,330)
------------- ----------- ------------
Net operating income 17,439 757 18,196
Other income, net of taxes 334 - 334
------------- ----------- ------------
Income before interest charges 17,773 757 18,530
Interest charges 10,514 11,166 (4) 21,680
------------- ----------- ------------
Net income (loss) 7,259 (10,409) (3,150)
Dividends on preferred stock and other 5 3,320 (5) 3,325
------------- ----------- ------------
Income (loss) applicable to common stock $ 7,254 $ (13,729) $ (6,475)
============= =========== ============
-11-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
Pro Forma Pro Forma
Actual Adjustment Balance
------------- ----------- ------------
(in thousands)
Operating revenues $ 118,125 $ - $ 118,125
------------- ----------- ------------
Operations and maintenance expense 81,197 380 (1) 81,577
Depreciation and amortization 9,974 2,866 (2) 12,840
Income taxes 712 (4,041) (3) (3,329)
Other operating expenses 11,750 - 11,750
------------- ----------- ------------
Total operating expenses 103,633 (795) 102,838
------------- ----------- ------------
Net operating income 14,492 795 15,287
Other income, net of taxes 281 - 281
------------- ----------- ------------
Income before interest charges 14,773 795 15,568
Interest charges 11,641 11,166 (4) 22,807
------------- ----------- ------------
Net income (loss) 3,132 (10,371) (7,239)
Dividends on preferred stock and other 36 3,320 (5) 3,356
------------- ----------- ------------
Income (loss) applicable to common stock $ 3,096 $ (13,691) $ (10,595)
============= =========== ============
TNP ENTERPRISES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
Pro Forma Pro Forma
Actual Adjustment Balance
------------- ----------- ------------
(in thousands)
Operating revenues $ 576,150 $ - $ 576,150
------------- ----------- ------------
Operations and maintenance expense 386,221 (1,435) (1) 384,786
Depreciation and amortization 39,295 11,464 (2) 50,759
Income taxes 19,120 (15,130) (3) 3,990
Other operating expenses 57,122 - 57,122
------------- ----------- ------------
Total operating expenses 501,758 (5,101) 496,657
------------- ----------- ------------
Net operating income 74,392 5,101 79,493
Other income, net of taxes (482) - (482)
------------- ----------- ------------
Income before interest charges 73,910 5,101 79,011
Interest charges 43,743 44,663 (4) 88,046
------------- ----------- ------------
Net income (loss) 30,167 (39,562) (9,395)
Dividends on preferred stock and other 19 13,280 (5) 13,261
------------- ----------- ------------
Income (loss) applicable to common stock $ 30,186 $ (52,842) $ (22,656)
============= =========== ============
-12-
Adjustments:
(1) Reflects pro forma TNP expenses, excluding one-time Merger
expenses, as follows:
Three Months Ended
March 31,
---------------------- Twelve Months Ended
2000 1999 December 31, 1999
------- ------- -------------------
TNP expenses:
Salaries and benefits $ 544 $ 544 $ 2,177
Rent and utilities 96 96 384
Miscellaneous 29 29 116
------- ------- -------------
Subtotal 669 669 2,677
One-time Merger expenses (230) (289) (4,112)
------- ------- -------------
$ 439 $ 380 $ (1,435)
======= ======= -------------
(2) Reflects amortization of goodwill over a 25-year amortization
period.
(3) Income tax effect of pro forma adjustments, excluding non-
deductible goodwill.
(4) Adjustment to interest expense reflects the following:
Three Months Twelve Months
Ended Ended
March 31, December 31,
2000 and 1999 1999
------------- -------------
Senior subordinated notes at 10.25 percent $ 7,047 $ 28,189
Term loan at 9.21 percent 3,685 14,738
Fees on unused senior secured credit facility at 0.5 percent 31 124
Amortization of capitalized financing fees 403 1,612
-------- --------
$ 11,166 $ 44,663
======== ========
(5) Adjustment to record estimated preferred stock dividend at 13.28%.
Note 3. Regulatory Matters
During 1999, legislation was passed in both Texas and New Mexico that
establishes retail competition for generation operations. Retail competition is
currently scheduled to begin in New Mexico and Texas on January 1, 2001, and
January 1, 2002, respectively. The legislation in both states contains
provisions that affect TNMP's operations. The impact of those provisions will
be noted as necessary in the following discussion.
Texas
Excess Earnings. As discussed in TNMP's 1999 Annual Report on Form 10-K,
TNMP has operated since 1998 with an earnings cap that provided for excess
earnings to be used, in part, to recover stranded costs. During 1998, TNMP's
Transition Plan directed the method for sharing of excess earnings. In 1999,
legislation was passed in Texas, which also provides for stranded cost recovery
through use of earnings in excess of an allowed rate of return.
1998 Excess Earnings. In its original 1998 earnings report filing, TNMP
reported that it had not earned in excess of the 11.25% return on equity
established in the Transition Plan. On May 3, 2000, the Public Utility
Commission of Texas (PUCT) issued a final order resolving two issues raised by
the PUCT's Office of Regulatory Affairs on August 16, 1999. The PUCT held in
favor of TNMP that the effects of a 1999 refinancing should not be retroactively
applied to 1998, but should be applied starting with the 1999 earnings report.
However, the PUCT ordered TNMP to defer a $4.8 million purchased power dispute
payment it made in 1998, and to amortize it over a four-year period, beginning
in 1998 and ending in 2001. Accordingly, in March 2000 TNMP recorded a
regulatory asset of $2.4 million, the unamortized balance of the $4.8 million
payment and a corresponding reduction to purchased power expense.
Based on the adjustment discussed above, TNMP earned $1.2 million more than
the earnings cap for 1998. In accordance with the Transition Plan, the excess
earnings will be shared equally between customer refunds and stranded cost
recovery.
-13-
1999 Excess Earnings. On March 30, 2000, TNMP filed its Annual Report
pursuant to (S)39.257 of the Public Utility Regulatory Act. The Annual Report
details TNMP's calculation of excess earnings under the provisions of the
legislation passed in 1999. The Annual Report showed that TNMP earned $22.0
million in excess of the 10.53% return on rate base established in the
legislation. That amount is $1.4 million lower than the $23.4 million TNMP had
accrued for excess earnings as of December 31, 1999. The difference is
attributable to the amortization of the 1998 purchased power settlement
described above.
2000 Excess Earnings. TNMP has recorded estimated excess earnings of $2.0
million for the three months ended March 31, 2000.
Unbundled Cost of Service Filing. The legislation requires TNMP to file a
rate case that will set rates for the transmission and distribution company that
will provide regulated services once competition begins in 2002. On March 31,
2000, TNMP filed its Unbundled Cost of Service Filing (UCOS) with the PUCT. The
filing proposes tariffs under which Retail Electric Providers (REPs) will be
able to purchase transmission and distribution services after December 31, 2001
in TNMP's service area. The tariffs are based upon a projected cost of service
of $150.3 million. The cost of service includes TNMP's projected reasonable and
necessary expenses, and return on its transmission and distribution rate base at
a 9.11% weighted average cost of capital.
The filing also includes a proposed Competition Transition Charge (CTC), as
required by the legislation. The CTC is designed to recover stranded costs
related to TNMP's generation assets and purchased power contracts, as determined
by a PUCT-established model. In its filing, TNMP calculated Economic Cost over
Market (ECOM) in the amount of $194.4 million would remain at January 1, 2002.
In addition, TNMP expects the PUCT to address certain issues related to its
January 2000 Business Separation Plan filing in the UCOS.
The PUCT has proposed a schedule for TNMP's UCOS that contemplates a
settlement conference in August 2000, hearings in October 2000, if no settlement
is reached, a preliminary decision in February 2001, and final orders in August
2001.
Fuel Reconciliation. At March 31, 2000, TNMP had an under-recovered
balance of fuel and the energy-related portion of purchased power costs of $24.3
million. PUCT rules require TNMP to reconcile its fuel and energy-related
purchased power costs at least every three years. In June 2000, TNMP plans to
file with the PUCT to recover and reconcile fuel and energy-related purchased
power expenses. TNMP will request an increase to the fuel factor based on
projected fuel and energy-related purchased power costs. TNMP will also request
an interim surcharge to begin recovery of TNMP's under recovered costs as of
March 31, 2000. Management believes the ultimate outcome of this fuel
reconciliation will not have a material adverse effect on TNP's or TNMP's
consolidated financial position.
New Mexico
1999 Rate Case. TNMP and the NMPRC Staff reached a settlement in this
case, which was filed in June 1999, and have submitted the settlement to the
NMPRC for approval. The settlement calls for a decrease in TNMP's base rates of
$1.8 million, or 6%, effective October 1, 1999. TNMP has reserved $0.9 million
related to the base rate reductions through March 31, 2000. TNMP expects the
NMPRC to act on the proposed settlement during the second quarter of 2000.
Restructuring. The New Mexico Legislature opened the state's electric
power market to consumer choice with the passage of the Electric Utility
Industry Restructuring Act of 1999 (the Act) in April 1999. The Act provides
for the phase-in of retail choice beginning January 1, 2001, and guarantees
recovery of at least 50 percent of a utility's stranded costs over a five-year
period. The Act also requires utilities to disaggregate their regulated
transmission and distribution business activities from their generation
operations, which will be subject to competition. TNMP is required to file its
plan for complying with the Act by June 1, 2000.
-14-
Note 4. Segment and Related Information
TNP's principal subsidiary, TNMP, has two reportable segments, Texas and
New Mexico. TNP manages the segments separately to respond to the differing
operational and regulatory climates in the two states.
The following tables present information about profits, losses and assets
of TNP's reportable segments (in thousands). In the tables below, "Total
assets" for Texas and New Mexico includes only net utility plant. All other
assets are included in All Other and Eliminations.
Three Months Ended March 31, 2000
---------------------------------
All Other and
Texas New Mexico Eliminations Consolidated
----- ---------- ------------ ------------
Operating revenues $ 104,449 $ 20,063 $ 14 $ 124,526
Net income (loss) 7,106 657 (504) 7,259
Total assets at March 31, 2000 823,261 84,349 93,080 1,000,690
Three Months Ended March 31, 1999
---------------------------------
All Other and
Texas New Mexico Eliminations Consolidated
----- ---------- ------------ ------------
Operating revenues $ 98,994 $ 19,117 $ 14 $ 118,125
Net income (loss) 3,194 619 (681) 3,132
Total assets at December 31, 1999 823,565 84,389 93,245 1,001,199
Note 5. Commitments and Contingencies
Legal Actions
Phillips Petroleum. TNMP is the defendant in a suit styled Phillips
Petroleum Company vs. Texas-New Mexico Power Company, filed on October 1, 1997
and pending in the 149th State District Court of Brazoria County, Texas. The
suit, which is in the discovery stage, is based on events surrounding an
interruption of electricity to a petroleum refinery and related facilities that
occurred in May 1997. Phillips Petroleum Company is seeking the recovery of
damages arising from the interruption and in May 1999 demanded payment in the
amount of $47.1 million. TNMP's tariff approved by the PUCT contains
limitations against recovery of the great majority of Phillip's alleged damages.
The Texas Supreme Court, in another matter, has recently upheld the
enforceability of such tariff limitations in litigation of this type; TNMP
believes the ruling will operate to substantially limit any recovery by Phillips
to the cost of its electrical equipment, in the event that any damages are
awarded in this matter. Discovery has not sufficiently progressed to quantify
any damages to Phillips' electrical equipment; however, Phillips has previously
reported to the SEC that it incurred costs of approximately $2.0 million in this
interruption. In May 1999, TNMP filed a Third Party Petition naming Sweeny
Cogeneration Limited Partnership, the operator of cogeneration and related
facilities at the Phillips refinery, as a defendant. TNMP has previously
charged to earnings the deductible amount of its insurance coverage, $500,000.
Power Resource Group. TNMP is a defendant in a suit styled Power Resource
Group, Inc. v. Public Utility Commission of Texas and Texas-New Mexico Power
Company, pending in the 345th District Court of Travis County, Texas. This
lawsuit, which was originally filed on May 21, 1999, appeals the PUCT's
dismissal of a regulatory case that Power Resource Group, Inc. (PR Group) had
filed against TNMP. PR Group is a developer of electric generating plants that
are intended to be qualifying cogeneration facilities. This lawsuit and the
regulatory case it appeals both stem from discontinued negotiations for power
supply. PR Group alleged that TNMP was required to buy power to be generated
from an as-yet-unbuilt cogeneration facility. TNMP filed its original answer
with the court on June 28, 1999.
In an amended petition filed January 13, 2000, PR Group asserts a claim of
damages of at least $158,000,000. It bases its claim on the assertion that it
was damaged when TNMP refused to execute an agreement after the aforementioned
discontinued negotiations, that TNMP profited significantly from PR Group's
work, that TNMP is in error when it relies on a PUCT order dismissing PR Group's
petition before the PUCT on substantially the same facts, and that TNMP
misrepresented that it would enter into a contract with PR Group to purchase
energy and capacity at rates equal to or below TNMP's avoided costs. TNMP
believes that PR Group's claims are without merit and intends to contest this
claim vigorously.
TNMP is involved in various claims and other legal proceedings arising in
the ordinary course of business. In the opinion of management, the ultimate
dispositions of these matters will not have a material adverse effect on TNMP's
and TNP's consolidated financial position or results of operations.
-15-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (MD&A).
The following discussion should be read in conjunction with the related
interim consolidated financial statements and notes.
Results Of Operations
Overall Results
TNP's earnings applicable to common stock were $7.3 million for the quarter
ended March 31, 2000 as compared to $3.1 million for the quarter ended March 31,
1999. Since the operations of TNMP (the principal subsidiary) currently
represent most of TNP's operations, the following discussion focuses on TNMP's
operations unless noted otherwise.
Under legislation passed in 1999, TNMP's earnings on its Texas operations
are capped at a 10.53% return on rate base adjusted for discounted rates to
industrial customers, which are expected to be approximately $2.0 million in
2000. TNMP will apply Texas earnings in excess of the cap to recover its
stranded costs. During the first quarter of 2000, TNMP recorded pre-tax excess
earnings of $2.0 million ($1.2 million after tax). That amount included an
adjustment to the excess earnings recorded in 1998 and 1999 due to the
resolution of a purchased power dispute discussed in Note 3 - 1998 Excess
Earnings.
TNMP's earnings applicable to common stock were $7.8 million for the
quarter ended March 31, 2000 as compared to $3.8 million for the quarter ended
March 31, 1999. The $4.0 million increase is attributable to the factors listed
below (in millions):
Changes in base revenues $ 1.5
Non-pass through purchased power and fuel expense 2.7
Transmission expenses 1.1
Other operating expenses (1.7)
Charge for recovery of stranded plant 2.1
Interest 1.0
All other (including income tax effects on the items above) (2.7)
--------
$ 4.0
========
Operating Revenues
The following table summarizes the components of base revenues (in
thousands).
Three Months Ended March 31,
-----------------------------
Increase
2000 1999 (Decrease)
-------- -------- ---------
Operating revenues $124,512 $118,111 $6,401
Pass-through expenses 47,895 43,033 4,862
-------- -------- ---------
Base revenues $ 76,617 $ 75,078 $1,539
======== ======== =========
Pass-through expenses in Texas include fuel and the energy-related portion
of purchased power. In New Mexico, pass-through expenses include all purchased
power costs. Details of pass-through expenses are discussed under "Results of
Operations -- Operating Expenses."
The following table summarizes the components of the change in base
revenues for the three months ended March 31, 2000 compared to the same period
in 1999 (in thousands).
Base revenue
-------------
Weather related $ 1,871
Customer growth 882
Price/sales mix (primarily base rate reductions) (2,418)
Transmission revenue 1,342
Other (138)
-------
Base revenue increase $ 1,539
=======
-16-
Current quarter base revenue increased $1.5 million, or 2.0%, compared to
the corresponding 1999 period. The increase resulted from higher weather-
related sales in the residential and commercial classes, higher transmission
revenues, and growth in the number of residential and commercial customers.
These increases were offset in part by a rate reduction in Texas pursuant to the
Transition Plan.
Transmission revenues increased due to a change in the method of allocating
Texas transmission costs that the PUCT approved as of September 1, 1999. The
PUCT adopted the new method to comply with the restructuring legislation passed
in 1999 as discussed in Note 3.
Effective January 1, 2000, TNMP implemented base rate reductions of 3% and
1% for residential and commercial customers, respectively, under the terms of a
Declaratory Order issued by the PUCT on December 6, 1999. Similar rate
reductions will take effect January 1, 2001.
The following table summarizes the components of gigawatt-hour (GWH) sales.
Three Months Ended March 31,
-----------------------------
Increase
2000 1999 (Decrease)
------ ------ -----------
GWH sales:
---------
Residential 503 492 11
Commercial 433 402 31
Industrial:
Firm 130 112 18
Economy 1,023 1,044 (21)
Power marketing 68 22 46
Other 23 26 (3)
----- ----- ---
Total GWH sales 2,180 2,098 82
===== ===== ===
Current quarter sales of 2,180 GWHs increased by 82 GWHs (or 3.9%) as
compared to the corresponding 1999 period. The increase resulted from higher
off-system sales, higher weather-related sales in the commercial and residential
classes, and growth in the number of commercial and residential customers.
Although weather in the first quarter of 2000 was below normal, it was not as
mild as weather in the first quarter of 1999.
Operating Expenses
TNMP incurred operating expenses of $106.5 million in the quarter ended
March 31, 2000, an increase of $3.4 million over the amount incurred during the
corresponding period of 1999. The increase reflects higher costs for purchased
power, fuel, and other operating expenses partially offset by lower transmission
expenses and lower charges for recovery of stranded plant.
Purchased Power and Fuel Expenses
The following table summarizes the components of TNMP's purchased power and
fuel expenses (in thousands).
Three Months Ended March 31,
-------------------------------
Increase
2000 1999 (Decrease)
------ ------ ----------
Purchased power and fuel expenses:
Pass through expenses:
Purchased power $ 39,411 $ 36,071 $ 3,340
Fuel 8,484 6,962 1,522
--------- --------- -------
47,895 43,033 4,862
--------- --------- -------
Non-pass through expenses
Texas demand purchased power 11,215 14,092 (2,877)
Other fuel costs 440 247 193
--------- --------- -------
11,655 14,339 (2,684)
--------- --------- -------
Total purchased power and fuel $ 59,550 $ 57,372 $ 2,178
========= ========= =======
In the first quarter of 2000, purchased power and fuel expenses increased
$2.2 million from the level incurred during the first quarter of 1999. Pass-
through expenses increased $4.9 million, reflecting increased purchases caused
by higher sales and price increases in New Mexico. Non pass-through expenses
decreased $2.7 million due to the deferral of a 1998 payment made to resolve a
billing dispute as described in Note 3 - 1998 Excess Earnings.
-17-
Transmission Expenses
Transmission expenses decreased by $1.1 million in the first quarter of
2000 compared to the corresponding period in 1999, due to the change in cost
allocation described in "Operating Revenues," above.
Other Operating Expenses
Other operating expenses for the current quarter were $1.7 million higher
than in the same quarter of 1999. This increase is primarily due to higher
payroll costs and a payment to the Texas Department of Housing for programs to
assist low-income customers.
Charge for Recovery of Stranded Plant
Charge for recovery of stranded plant decreased $2.1 million in the first
quarter of 2000 compared to the same period in 1999. During the first quarter
of 2000, TNMP recorded pre-tax excess earnings of $1.6 million. In the first
quarter of 1999, TNMP recorded $3.7 million of additional depreciation under the
Transition Plan.
Interest Expense
Interest charges decreased by $1.0 million due to TNMP's January 1999
issuance of $175 million of 6.25% senior notes, which replaced $130 million of
12.5% secured debentures, and due to reduced debt levels of the credit
facilities, and lower amortization of debt related expenses.
Financial Condition
TNMP Liquidity
The main sources of liquidity for TNMP are cash flow from operations and
borrowings from its credit facility. TNMP's cash flow from operations was $6.5
million lower for the first quarter of 2000 as compared to the first quarter of
1999 due to lower receipts from customers, resulting from base rate reductions
in Texas, and the timing of the first interest payment on TNMP's 6.25% senior
notes.
As discussed in Note 2, due to the change in control of TNMP resulting from
the Merger, TNMP has made a tender offer to purchase its Series U first mortgage
bonds and Series A Secured Debentures at a price of 101% of par. TNMP has the
ability to borrow up to $240 million from a backstop credit facility to
refinance any debt that must be redeemed as a result of this tender offer.
TNMP has $100 million of 9.25% Series U first mortgage bonds that mature in
September 2000. To the extent that the bonds are not purchased under the tender
offer described above, TNMP expects to establish a new credit facility in an
amount sufficient to refinance the bonds.
TNMP has sufficient liquidity to satisfy the possibility of any known
contingencies. Management believes cash flow from operations, the backstop
credit facility described above and periodic borrowings under its revolving
credit facility should be sufficient to meet working capital requirements at
least through 2000.
TNP Liquidity
TNP's main sources of liquidity, and its ability to service the debt issued
to finance the Merger, depend primarily on the earnings of TNMP and the
distribution of those earnings in the form of cash dividends, as well as tax
payments from TNMP due under a tax sharing agreement between TNP and TNMP. TNP
has a $25 million revolving credit facility that will be used to provide working
capital and meet other requirements. The revolving credit facility was put in
place at the time of the Merger. As of the date of the Merger, TNP had not
borrowed against the revolving credit facility, and the entire $25 million was
available to TNP.
Cash dividends from TNMP to TNP are limited by restrictions included in
TNMP's debt indentures and bank agreements. In addition, the regulatory orders
from the PUCT and the NMPRC approving the Merger contain additional restrictions
on TNMP's ability to pay cash dividends to TNP.
During the first quarter of 2000, TNP's cash flow from operations was $1.7
million lower than in the first quarter of 1999 due to TNMP's lower cash flow
from operations as discussed above, offset by reduced expenditures for non-
regulated activities.
-18-
Management believes that dividends from TNMP, payments from TNMP under the
tax sharing agreement, and periodic borrowings under its revolving credit
facility should be sufficient to meet TNP's working capital requirements at
least through 2000.
-19-
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
See Note 5 for information regarding material legal proceedings.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are filed with this report:
3(a)(i) Amended and Restated Articles of Incorporation of TNP Enterprises,
Inc.
3(a)(ii) Amended and Restated Bylaws of TNP Enterprises, Inc.
3(b)(i) Amended and Restated Articles of Incorporation of Texas-New Mexico
Power Company
3(b)(ii) Amended and Restated Bylaws of Texas-New Mexico Power.
3(a)(iii) Articles of Merger of ST Acquisition Corp. with and into TNP
Enterprises, Inc.
4(a)(i) Statement of Resolutions Establishing Two Series of Shares of ST
Acquisition Corp., relating to Senior Redeemable Preferred Stock,
Series A and Series B.
4(a)(ii) Share Registration Rights Agreement dated as of April 7, 2000 by
and among ST Acquisition, Corp., as Issuer, and CIBC Inc., CIBC
World markets Corp., Chase Securities Inc., Continental Casualty
Company and Laurel Hill Capital Partners LLC, as Purchasers,
relating to 100,000 shares of Senior Redeemable Preferred Stock,
$1,000 Liquidation Preference per Share.
4(a)(iii) Assumption Agreement by TNP Enterprises, Inc. dated April 7, 2000.
4(b)(i) Registration Rights Agreement Dated as of April 7, 2000 by and
among ST Acquisition Corp, as Issuer, and CIBC World Markets
Corp., Chase Securities, Inc., and Barclays Capital, Inc., as
Initial Purchasers, relating to 10.25% Senior Subordinated Notes
Due 2010.
4(b)(ii) Assumption Agreement by TNP Enterprises, Inc. dated April 7, 2000.
27(a) Financial Data Schedule for TNP.
27(b) Financial Data Schedule for TNMP.
(b) Reports on Form 8-K:
TNP filed a report on Form 8-K dated April 21, 2000, to disclose the
closing of the Merger.
TNP filed a report on Form 8-K dated May 2, 2000, to disclose the
termination of Arthur Andersen, LLP, and the appointment of Deloitte &
Touche, LLP, as its independent accountants effective April 25, 2000.
Statement Regarding Forward Looking Information
The discussions in this document that are not historical facts, including,
but not limited to, the continued application of regulatory accounting
principles, future cash flows and the potential recovery of stranded costs, are
based upon current expectations. Actual results may differ materially. Among
the facts that could cause the results to differ materially from expectations
are the following: our ability to adapt to open market competition enacted by
our legislators and regulators; the effects of accounting pronouncements that
may be issued periodically; changes in regulations affecting TNP's and TNMP's
businesses; insurance coverage available for claims made in litigation; the
effect of a Texas Supreme Court decision on the limitations of any actual
damages awarded in currently ongoing litigation; future acquisitions or
strategic partnerships; general business and economic conditions, and price
fluctuations in the electric power market; our ability to market preferred stock
to replace the bridge preferred stock; and other factors described from time to
time in TNP's and TNMP's reports filed with the Securities and Exchange
Commission. TNP and TNMP wish to caution readers not to place undue reliance on
any such forward looking statements, which are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.
-20-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
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.
(Registrant) TNP ENTERPRISES, INC.
Date: May 12, 2000 By \s\ THEODORE A. BABCOCK
-----------------------
Theodore A. Babcock
Chief Financial Officer
TEXAS-NEW MEXICO POWER COMPANY
Date: May 12, 2000 By \s\ MANJIT S. CHEEMA
--------------------
Manjit S. Cheema
Senior Vice President and Chief Financial
Officer
Date: May 12, 2000 By \s\ SCOTT FORBES
----------------
Scott Forbes
Chief Accounting Officer
-21-