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 MARCH 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _____ to _____
Commission File Number 1-5007
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TAMPA ELECTRIC COMPANY
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(Exact name of registrant as specified in its charter)
FLORIDA 59-0475140
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
702 N. 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 of 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, 2001):
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.
Index to Exhibits Appears on Page 12
Page 1 of 12
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS
In the opinion of management, the unaudited condensed consolidated
financial statements include all adjustments which are of a recurring nature and
necessary to present fairly the financial position of Tampa Electric Company as
of March 31, 2001 and 2000, and the results of operations and cash flows for the
three-month periods ended March 31, 2001 and 2000. The results of operations for
the three-month period ended March 31, 2001 are not necessarily indicative of
the entire fiscal year ending Dec. 31, 2001. 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,
2000 and to the notes on page 6 of this report.
2
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in millions)
MARCH 31, DEC. 31,
2001 2000
-------- --------
ASSETS
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
Utility plant in service
Electric $ 4,039.0 $ 4,054.1
Gas 639.1 632.1
Construction work in progress 223.7 150.1
---------- ----------
4,901.8 4,836.3
Accumulated depreciation (1,934.5) (1,931.3)
---------- ----------
2,967.3 2,905.0
Other property 8.2 8.3
---------- ----------
2,975.5 2,913.3
---------- ----------
CURRENT ASSETS
Cash and cash equivalents 1.1 0.7
Receivables, less allowance for uncollectibles 173.9 180.4
Inventories, at average cost
Fuel 66.5 56.8
Materials and supplies 50.8 52.4
Prepayments 1.6 3.3
---------- ----------
293.9 293.6
---------- ----------
DEFERRED DEBITS
Unamortized debt expense 12.7 13.2
Deferred income taxes 124.5 124.3
Regulatory asset - tax related 62.1 62.3
Other 155.2 143.1
---------- ----------
354.5 342.9
---------- ----------
$ 3,623.9 $ 3,549.8
========== ==========
LIABILITIES AND CAPITAL
CAPITAL
Common stock $ 1,158.1 $ 1,148.1
Retained earnings 294.2 299.0
---------- ----------
1,452.3 1,447.1
LONG-TERM DEBT, LESS AMOUNT DUE WITHIN ONE YEAR 788.3 789.3
---------- ----------
2,240.6 2,236.4
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CURRENT LIABILITIES
Long-term debt due within one year 55.2 55.2
Notes payable 293.2 231.2
Accounts payable 159.0 188.0
Customer deposits 83.4 82.4
Interest accrued 38.2 34.2
Taxes accrued 98.3 71.6
---------- ----------
727.3 662.6
---------- ----------
DEFERRED CREDITS
Deferred income taxes 428.4 424.5
Investment tax credits 35.0 36.1
Regulatory liability-tax related 70.7 72.4
Other 121.9 117.8
---------- ----------
656.0 650.8
---------- ----------
$ 3,623.9 $ 3,549.8
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in millions)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 2000
--------- ---------
REVENUES
Electric $ 335.8 $ 292.4
Gas 134.1 86.6
--------- ---------
469.9 379.0
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OPERATING EXPENSES
Operation
Fuel 76.3 79.5
Purchased power 54.6 25.8
Natural gas sold 82.0 40.7
Other 62.7 55.3
Maintenance 27.3 26.7
Depreciation 49.1 45.1
Taxes-Federal and state income 23.0 21.2
Taxes-Other than income 35.6 30.8
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410.6 325.1
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OPERATING INCOME 59.3 53.9
OTHER INCOME 2.5 0.4
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INCOME BEFORE INTEREST CHARGES 61.8 54.3
--------- ---------
INTEREST CHARGES
Interest on long-term debt 13.9 12.9
Other interest 6.9 4.3
--------- ---------
20.8 17.2
--------- ---------
NET INCOME $ 41.0 $ 37.1
========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
4
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in millions)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 41.0 $ 37.1
Adjustments to reconcile net income to net cash
Depreciation 49.1 45.1
Deferred income taxes 3.4 (2.0)
Investment tax credits, net (1.1) (1.1)
Allowance for funds used during construction (1.1) (0.5)
Deferred recovery clause (7.7) 3.5
Receivables, less allowance for uncollectibles 6.6 7.7
Inventories (8.0) (18.2)
Taxes accrued 26.7 34.1
Interest accrued 4.0 14.1
Accounts payable (29.1) (17.3)
Other 1.6 13.2
--------- ---------
85.4 115.7
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (111.9) (88.2)
Allowance for funds used during construction 1.1 0.5
--------- ---------
(110.8) (87.7)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from contributed capital from parent 10.0 83.0
Repayment of long-term debt (0.4) --
Net increase (decrease) in short-term debt 62.0 (107.0)
Payment of dividends (45.8) (29.8)
--------- ---------
25.8 (53.8)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 0.4 (25.8)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0.7 26.1
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1.1 $ 0.3
========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Tampa Electric Company (the company) is a wholly owned
subsidiary of TECO Energy, Inc.
B. The company has made certain commitments in connection with
its continuing construction program. Total construction expenditures
during 2001 are estimated to be $373 million for its electric division
(referred to as Tampa Electric) and $74 million for its natural gas
division (referred to as Peoples Gas System).
Tampa Electric Company is a potentially responsible party for
certain superfund sites and, through its Peoples Gas System division,
for certain former manufactured gas plant sites. While the joint and
several liability associated with these sites presents the potential
for significant response costs, the company estimates its ultimate
financial liability at approximately $22 million over the next 10
years. The environmental remediation costs associated with these sites
have been recorded on the accompanying consolidated balance sheet, and
are not expected to have a significant impact on customer prices.
C. CONTRIBUTION BY OPERATING DIVISION
(in millions) NET
REVENUES INCOME
-------- -------
THREE MONTHS ENDED MARCH 31, 2001
Electric division $ 336.0 $ 30.5
Peoples Gas System 134.1 10.5
-------- -------
470.1 41.0
Other and eliminations (0.2) --
-------- -------
Tampa Electric Company $ 469.9 $ 41.0
======== =======
THREE MONTHS ENDED MARCH 31, 2000
Electric division $ 292.6 $ 28.6
Peoples Gas System 86.6 8.5
-------- -------
379.2 37.1
Other and eliminations (0.2) --
-------- -------
Tampa Electric Company $ 379.0 $ 37.1
======== =======
D. The company adopted FAS 133, Accounting for Derivative
Instruments and Hedging, effective Jan. 1, 2001. The standard requires
the company to recognize derivatives as either assets or liabilities in
the financial statements, to measure those instruments at fair value,
and to reflect the changes in fair value of those instruments as either
components of comprehensive income or in net income, depending on the
types of those instruments. The company has completed the review and
documentation of its derivative contracts, and found such activity has
been minimal and relatively short-term in duration. Based on policies
and procedures approved by the Board of Directors, from time to time,
the company enters into futures, swaps and options contracts to limit
exposure to gas price increases at the Peoples Gas System.
The company did not have any open derivatives or hedges at
March 31, 2001, or at adoption of the standard that were subject to FAS
133 accounting. Management will continue to document all current, new
and possible uses of derivatives, and develop procedures and methods
for measuring them.
6
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements,
which are subject to the inherent uncertainties in predicting future results and
conditions. Certain factors that could cause actual results to differ materially
from those projected in these forward-looking statements include the following:
interest rates and other factors that could impact Tampa Electric Company's
ability to obtain access to sufficient capital on satisfactory terms; general
economic conditions, particularly those in Tampa Electric's service area
affecting energy sales; weather variations affecting energy sales and operating
costs; potential competitive changes in the electric and gas industries,
particularly in the area of retail competition; regulatory actions affecting
Tampa Electric and Peoples Gas System; commodity price changes affecting the
competitive positions of Tampa Electric and Peoples Gas System; and changes in
and compliance with environmental regulations that may impose additional costs
or curtail some activities. Some of these factors are discussed more fully under
"Investment Considerations" in TECO Energy's Annual Report on Form 10-K for the
year ended Dec. 31, 2000, and reference is made thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001:
Tampa Electric Company's net income for the quarter ended March 31,
2001 was $41.0 million, up from $37.1 million recorded for the three-month
period ended March 31, 2000. The 11-percent increase for the quarter relative to
last year reflected the continued strong customer growth and favorable weather.
ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's net income for the first quarter was $30.5 million,
compared with $28.6 million for the same period in 2000. The company showed
improved results from retail energy sales growth of 11 percent driven by
continued customer growth of almost 3 percent and favorable winter weather. Base
revenues increased by $10.5 million as a result of favorable weather. The
increased revenues were somewhat offset by higher operation and maintenance
expense due to increased spending on generation assets and an increase in
reliability reserve requirements, and higher depreciation due to normal plant
growth. A summary of the operating statistics for the three months ended March
31, 2001 and 2000 is below:
(in millions, except average customers) OPERATING REVENUES KILOWATT-HOUR SALES
-------------------------------- ---------------------------------
THREE MONTHS ENDED MARCH 31, 2001 2000 CHANGE 2001 2000 CHANGE
------- ------- ------ -------- -------- ------
Residential $158.6 $131.8 20.3% 1,878.8 1,592.3 18.0%
Commercial 91.8 82.7 11.0% 1,304.4 1,225.4 6.4%
Industrial - Phosphate 16.3 14.2 15.0% 343.1 334.8 2.5%
Industrial - Other 15.6 14.4 8.3% 271.1 258.9 4.7%
Other sales of electricity 23.2 21.4 8.4% 313.9 302.3 3.8%
Deferred and other revenues (6.9) (2.0) -- -- -- --
------ ------ ------- -------
298.6 262.5 13.7% 4,111.3 3,713.7 10.7%
Sales for resale 27.5 22.1 24.4% 629.1 514.8 22.2%
Other operating revenue 9.9 8.0 24.0% -- -- --
------ ------ ------- -------
$336.0 $292.6 14.8% 4,740.4 4,228.5 12.1%
====== ====== ======= =======
Average customers (Thousands) 572.1 556.3 2.8%
====== ======
System Net Input (Kilowatt hours) 4,114.1 3,855.2 6.7%
======= =======
7
NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Peoples Gas System (PGS) reported net income for the quarter of $10.5
million, compared with $8.5 million for the same period last year. Quarterly
results reflected strong customer growth of more than 4 percent and higher
residential and commercial sales as a result of favorable winter weather this
year, which increased net revenue by $1.5 million. Decreased volumes for
low-margin, transportation gas for electric power generators, interruptible
customers and off-system sales reflected the higher cost of gas for these
customers who have the ability to switch to alternate fuels or alter consumption
patterns. Operating expenses were level with last year, while depreciation
increased slightly due to normal plant growth. A summary of the operating
statistics for the three months ended March 31, 2001 and 2000 is below:
(in millions, except average customers) OPERATING REVENUES THERMS
---------------------------------- -------------------------------
THREE MONTHS ENDED MARCH 31, 2001 2000 CHANGE 2001 2000 CHANGE
----- ----- ------ ----- ----- ------
BY CUSTOMER SEGMENT:
Residential $ 41.8 $ 25.4 64.4% 27.5 23.9 15.1%
Commercial 67.5 38.4 76.0% 90.8 84.4 7.7%
Industrial 3.9 3.5 12.0% 62.0 80.1 -22.5%
Off system sales 4.4 9.2 -52.2% 6.6 30.2 -78.1%
Power generation 2.9 2.5 16.0% 78.0 102.4 -23.8%
Other revenues 13.6 7.6 78.9% -- -- --
------- ------- ----- -----
$ 134.1 $ 86.6 54.9% 264.9 321.0 -17.4%
======= ======= ===== =====
BY SALES TYPE:
System supply $ 105.0 $ 66.1 59.0% 82.0 103.9 -21.0%
Transportation 15.5 12.9 20.2% 182.9 217.1 -15.7%
Other revenues 13.6 7.6 78.9% -- -- --
------- ------- ----- -----
$ 134.1 $ 86.6 54.9% 264.9 321.0 -17.4%
======= ======= ===== =====
Average customers (Thousands) 266.3 255.6 4.2%
======= =======
OTHER
Allowance for funds used during construction (AFUDC) was $1.1 million
and $0.5 million for the three months ended March 31, 2001 and 2000,
respectively. AFUDC is expected to increase over the next several years
reflecting Tampa Electric's generation expansion activities.
Total interest charges were $20.8 million for the three months ended
March 31, 2001 compared to $17.2 million for the same period in 2000. Increased
financing costs for the first quarter of 2001 reflected primarily higher
borrowing levels.
RECENT DEVELOPMENTS
Fitch, Inc. and Standard & Poor's in July 2000 and October 2000,
respectively, lowered the ratings of Tampa Electric Company. Each rating agency
indicated that the rating outlook remained negative. On March 27, 2001, Moody's
Investor Services, Inc. lowered the long-term ratings on the debt securities at
Tampa Electric. The ratings actions were attributable to the required capital
outlays of Tampa Electric and the uncertainties related to industry
restructuring. These downgrades and any further downgrades may affect the
company's ability to borrow and increase its financing costs which may decrease
earnings. The resulting ratings are as follows:
MOODY'S STANDARD & POOR'S FITCH
------- ----------------- -----
Senior Secured Aa3 A AA
Senior Unsecured A1 A AA-
8
As previously disclosed, Tampa Electric, Florida Power and Light, and
Florida Power Corporation (collectively "Applicants"), in compliance with the
Federal Energy Regulatory Commission's (FERC) Order No. 2000, submitted to the
FERC an application to form a regional transmission organization ("RTO") to be
known as GridFlorida. On March 28, 2001, FERC issued a comprehensive order
provisionally approving the GridFlorida proposal, subject to certain compliance
items that Applicants will address in a May 14, 2001 status report, and in a May
29, 2001 compliance filing. The Applicants expect to make additional filings
later in 2001 in order to fully implement their proposal on transmission pricing
and market design.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
The company adopted FAS 133, Accounting for Derivative Instruments and
Hedging, effective Jan. 1, 2001. The standard requires the company to recognize
derivatives as either assets or liabilities in the financial statements, to
measure those instruments at fair value, and to reflect the changes in fair
value of those instruments as either components of comprehensive income or in
net income, depending on the types of those instruments. The company did not
have any open derivatives or hedges at March 31, 2001, or at adoption of the
standard that were subject to FAS 133 accounting.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Tampa Electric Company is exposed to changes in interest rates
primarily as a result of its borrowing activities. A hypothetical 10-percent
increase in Tampa Electric Company's weighted average interest rate on its
variable rate debt would have an estimated $2 million impact on Tampa Electric
Company's pretax earnings over the next fiscal year.
A hypothetical 10-percent decrease in interest rates would not have a
significant impact on the estimated fair value of Tampa Electric Company's
long-term debt at March 31, 2001.
Based on policies and procedures approved by the Board of Directors,
from time to time Tampa Electric Company may enter into futures, swaps and
option contracts to moderate exposure to interest rate changes.
COMMODITY PRICE RISK
Currently, at Tampa Electric and Peoples Gas System, commodity price
increases due to changes in market conditions for fuel, purchased power and
natural gas are recovered through cost recovery clauses, with no effect on
earnings.
From time to time, Peoples Gas System may enter into futures, swaps and
options contracts to limit the effect 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.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.1 TECO Energy, Inc. 1996 Equity Incentive Plan, as amended April
18, 2001.
12 Ratio of earnings to fixed charges
(B) REPORTS ON FORM 8-K
The registrant did not file any Current Reports on Form 8-K for
the quarter ended March 31, 2001.
10
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
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(Registrant)
Date: May 14, 2001 *By: /s/ G. L. GILLETTE
-------------------------
G. L. GILLETTE
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
11
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
10.1 TECO Energy, Inc. 1996 Equity Incentive Plan, as amended
April 18, 2001.
12 Ratio of earnings to fixed charges
12