SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[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 1-12927
NEW CENTURY ENERGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1334327
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1225 17th Street, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (303) 571-7511
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
On July 31, 1997, 200 shares of the Registrant's Common Stock, $1 par
value (the only class of common stock), were issued and outstanding. On August
1, 1997, the Registrant canceled all shares previously outstanding and issued
approximately 104,469,457 shares of its Common Stock, $1 par value, for all of
the outstanding common stock of Public Service Company of Colorado and
Southwestern Public Service Company.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....... 6
Item 5. Other Matters............................................. 6
Item 6. Exhibits and Reports on Form 8-K.......................... 6
Signatures........................................................ 8
Exhibit 15........................................................ 9
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PART I - FINANCIAL INFORMATION
Item l. Financial Statements
NEW CENTURY ENERGIES, INC.
BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
Receivable from shareholder (Note 2).................. $ 200 $ 200
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities........................................... $ - $ -
Shareholders' equity -
Common Stock, $1.00 par value (Note 1):
260,000,000 shares authorized;
200 shares issued and outstanding................. 200 200
Preferred Stock, $1.00 par value:
20,000,000 shares authorized;
No shares issued or outstanding................... - -
---- ----
Total liabilities and shareholders' equity............ $ 200 $ 200
====== ========
The accompanying notes are an integral part of these balance sheets.
1
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NEW CENTURY ENERGIES, INC.
NOTES TO FINANCIAL STATEMENT
(Unaudited)
1. Formation and Organization
New Century Energies, Inc. ("NCE" or the "Company") was incorporated under
the laws of the State of Delaware on August 21, 1995 with 50% of its outstanding
200 shares, $1.00 par value, of common stock purchased by Public Service Company
of Colorado ("PSCo") and 50% purchased by Southwestern Public Service Company
("SPS").
In August 1995, NCE, PSCo and SPS entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") providing for a business combination as
peer firms involving PSCo and SPS in a tax-free "merger of equals" transaction
(the "Merger"). Effective August 1, 1997, following receipt of all required
state and Federal regulatory approvals, PSCo and SPS merged and became
wholly-owned subsidiaries of NCE, which will be a registered holding company
under the Public Utility Holding Company Act of 1935. Each outstanding share of
PSCo common stock was canceled and converted into the right to receive one share
of NCE common stock and each outstanding share of SPS common stock was canceled
and converted into the right to receive 0.95 of one share of NCE common stock.
Based on the outstanding common stock of PSCo and SPS at August 1, 1997, the
Merger resulted in the common shareholders of PSCo owning 63% of the common
equity of NCE and the common shareholders of SPS owning 37% of the common equity
of NCE.
Effective with the Merger, the utility and certain non-utility subsidiaries
of PSCo were transferred by a declaration of a dividend of the subsidiaries'
stock, at net book value, to NCE. NCE then made a capital contribution of those
non-utilities' stock, at net book value, to NC Enterprises Inc., a new
intermediate holding company of NCE. Such transfers and subsequent contributions
are not expected to have a material impact on PSCo's financial statements.
Effective with the Merger, the common stock of Quixx Corporation and Utility
Engineering Corporation, wholly-owned subsidiaries of SPS, were transferred
through the sale by SPS of all of the outstanding common stock of such
subsidiaries at net book value (approximately $118.7 million) to NC Enterprises
Inc. in exchange for notes payable debt of NC Enterprises Inc. These notes
payable have thirty-year terms and bear interest at a rate of 7.25% per year
with annual interest payments due beginning August 1, 1998 and annual principal
payments due beginning August 1, 2001.
NCE engaged in no significant operations other than the organization of the
public utility holding company prior to August 1, 1997. Descriptions of the
businesses of PSCo and SPS are contained in their reports under Section 13 or
15(d) of the Securities Exchange Act of 1934, including the respective Form
10-Q's for the quarter ended June 30, 1997, incorporated herein by reference.
Operating revenues and net income for the three months and six months ended
June 30, 1997 and 1996, for PSCo, SPS and NCE on a pro-forma basis are as
follows (in millions):
PSCo SPS NCE*
---- --- ----
Three months ended June 30, 1997:
Operating revenues $ 543 $ 243 $ 786
Net income 31 6 34
Three months ended June 30, 1996:
Operating revenues $ 485 $ 248 $ 733
Net income 35 28 59
Six months ended June 30, 1997:
Operating revenues $ 1,220 $ 465 $ 1,685
Net income 93 25 112
2
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Six months ended June 30, 1996:
Operating revenues $ 1,108 $ 464 $ 1,572
Net income 99 43 136
* NCE's net income is net of dividend requirements on preferred stock of
subsidiaries
2. Related Party Transactions
PSCo and SPS have incurred all costs related to the formation of NCE,
including those costs associated with the registration of NCE's common stock and
its application to be a registered public utility holding company. Such costs,
approximately $0.3 million for the six months ended June 30, 1997 (approximately
$3.7 million since inception), were not charged to NCE. Accordingly, the Company
has no operating or cash flow activities to report in statements of income or
statements of cash flows for the six month periods ended June 30, 1997 and 1996.
The cash received from shareholders was deposited into a PSCo bank account
during the first quarter of 1996 and, accordingly, NCE has recognized this
amount as a receivable from shareholder in the accompanying balance sheets.
3. Capital Stock
Shareholder Rights
On April 30, 1997, the Board of Directors declared that a dividend of one
right for each Common Share be paid on the effective date of the business
combination among the Company, PSCo and SPS to shareholders of record of the
common shares issued and outstanding at the close of business on the day before
the effective date of the business combination. Each right represents the right
to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock at a price of $100 per one one-hundredth share. Additionally,
the Board of Directors created a Series A Junior Participating Preferred Stock,
$1 par value, and reserved 2,600,000 shares for issuance upon exercise of the
Rights. In the event any person or group acquires 10% or more of the Company's
common stock, the holders of the rights generally will be entitled to receive,
upon exercise, common stock of the Company having a value equal to two times the
exercise price of the right. In addition, the Board of Directors may, at its
option after a person or group acquires 10% or more of the Company's common
stock, exchange all or part of the rights for shares of the Company's common
stock. In the event that the Company is acquired in a merger or other business
combination of 50% or more of the Company's assets or earning power is sold or
transferred, the holders of the rights have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
exercise price of the right. The Company may redeem the rights at a price of
$.001 per right at any time prior to the tenth day following the date any person
or group acquires 10% or more of the Company's common stock. The rights expire
10 years after the record date, unless earlier redeemed or exchanged by the
Company.
4. Capital Sources
Short-Term Borrowing Arrangements
NCE is arranging a $225 million credit facility which is expected to be in
place shortly after the effective date of the Merger. NCE can only borrow $100
million under this credit facility until the outstanding common stock of PS
Colorado Credit Corporation, a wholly-owned subsidiary of PSCo, is transferred
to NCE. In addition, NCE has arranged a $30 million bridge loan facility to
provide the funds necessary for the repayment of certain pre-merger PSCo
subsidiary short-term borrowings to permit the transfer of such subsidiaries to
NCE or to NC Enterprises, Inc., on the effective date of the merger.
3
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Registration Statement
On June 6, 1997, the Company filed a registration statement with the SEC
for the issuance of 10 million shares of common stock to be issued under the
Company's Dividend Reinvestment and Cash Payment Plan. Any proceeds received by
the Company will be used for general corporate purposes. This program allows for
either the purchase of shares on the open market or the issuance of new shares.
The Dividend Reinvestment Plan allows the Company's shareholders to purchase
additional shares of the Company's common stock through the reinvestment of cash
dividends and to purchase additional shares of common stock with optional cash
payments.
5. Management's Representations
In the opinion of the Company, the accompanying balance sheets include all
adjustments necessary for the fair presentation of the financial position of NCE
at June 30, 1997 and December 31, 1996. As discussed in Note 2, all costs
related to the formation of NCE have been incurred by PSCo and SPS; therefore,
the Company has no operating or cash flow activities to report in a statement of
income or a statement of cash flows for the first six months of 1997 and 1996.
The financial information and notes thereto should be read in conjunction with
the financial information included in NCE's 1996 Annual Report on Form 10-K and
NCE's Form 8-K dated August 1, 1997 in connection with the consummation of the
Merger.
4
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO NEW CENTURY ENERGIES, INC.
We have reviewed the accompanying balance sheet of New Century Energies, Inc. (a
Delaware corporation) as of June 30, 1997. This financial statement is the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statement referred to above for it to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of New Century Energies, Inc. as of December 31,
1996 (not presented herein), and, in our report dated February 6, 1997, we
expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying balance sheet as of December 31, 1996,
is fairly stated, in all material respects, in relation to the balance sheet
from which it has been derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
August 8, 1997
5
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
NCE engaged in no significant operations other than the organization
of the public utility holding company. See Note 1. Formation and
Organization and Note 2. Related Party Transactions in Item 1. Financial
Statements.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 29, 1997, the shareholders of NCE elected the following persons
as directors:
Wayne H. Brunetti A. Barry Hirshfeld
Coney C. Burgess J. Howard Mock
Danny H. Conklin Will F. Nicholson, Jr.
Giles M. Forbess J. Michael Powers
Gayle L. Greer Rodney E. Slifer
Bill D. Helton W. Thomas Stephens
R. R. Hemminghaus Robert G. Tointon
Subsequently, on May 1, 1997, the shareholders approved the New Century
Energies, Inc. Omnibus Incentive Plan which was previously adopted by the NCE
directors as noted below.
Item 5. Other Matters
On April 30, 1997, a Board of Directors meeting was held where the
following officers of NCE listed were approved and authorized to proceed with
organization and operation of NCE.
Chairman of the Board and Chief Executive Officer Bill D. Helton
Vice Chairman, President and Chief Operating Officer Wayne H.Brunetti
Executive Vice President and Treasurer Richard C. Kelly
Senior Vice President Patricia T. Smith
Secretary W. Wayne Brown
Assistant Secretary Carol J. Peterson
Assistant Secretary Mary Pullum
Assistant Treasurer James Steinhilper
Additionally, the Board of Directors approved various administrative and
organizational actions including, among other things, the approval of an
executive compensation plan and a shareholder rights agreement, adoption of the
Omnibus Plan, a corporate seal, form of stock certificate and the appointment of
General Counsel and independent public accountants.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule UT
6
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(b) Reports on Form 8-K
- A report for NCE on Form 8-K dated August 1, 1997, was filed on August 1,
1997 which includes Item 2. Acquisition or Disposition of Assets and
Item 7. Financial Statements and Exhibits:
On August 1, 1997, following the receipt of all required state and Federal
regulatory approvals, PSCo and SPS combined to form NCE with the result
that the common shareholders of PSCo and SPS became the common shareholders
of NCE.
Exhibits in the Form 8-K included:
Exhibit No. Description
----------- -----------
99-1 News Release of New Century Energies, Inc., dated August 1, 1997
99-2 Supplemental Consolidated Financial Statements for the following
periods were included:
-supplemental consolidated balance sheets as of December 31, 1996
and 1995 and the related supplemental consolidated statements of
income, shareholders' equity and cash flows for the years ended
December 31, 1996, 1995, and 1994.
99-3 Supplemental Consolidated Condensed Quarterly Financial Statements
-supplemental consolidated condensed balance sheets as of March 31,
1997 and the related supplemental consolidated condensed statements
of income and cash flows statements for the three months ended March
31, 1997 and March 31, 1996.
- A report for NCE on Form 8-K dated August 1, 1997, was filed on August 4,
1997 which includes Item 5. Other Events and Item 7. Financial Statements
and Exhibits:
On August 4, 1997, NCE filed as an exhibit, the Rights Agreement (the
"Rights Agreement"), dated as of August 1, 1997, between NCE and The Bank of
New York, as Rights Agent. The Rights Agreement describes the terms of
certain shareholder rights declared by the Board of Directors on April 30,
1997. These rights are discussed further in Note 3. Capital Stock-Shareholder
Rights of Item 1. FINANCIAL STATEMENTS of the current Form 10-Q report.
7
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, New Century Energies, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
By /s/R. C. Kelly
---------------------------------
R. C. KELLY
Executive Vice President and Chief Financial
Officer, Financial and Support Services
Dated: August 14, 1997
8
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Exhibit 15
August 8, 1997
New Century Energies, Inc.:
We are aware that New Century Energies, Inc. has incorporated by reference
in its Registration Statement (Form S-8, File No. 333-28639) pertaining to the
Omnibus Incentive Plan and the Company's Registration Statement (Form S-3, File
No. 333-28637) pertaining to the Dividend Reinvestment and Cash Payment Plan,
its Form 10-Q for the quarter ended June 30, 1997, which includes our report
dated August 8, 1997, covering the unaudited financial statement contained
therein. Pursuant to Regulation C of the Securities Act of 1933, that report is
not considered a part of the registration statement prepared or certified by our
Firm or a report prepared or certified by our Firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
9
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW
CENTURY ENERGIES, INC. BALANCE SHEET AS OF JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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