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 September 30, 1996
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 1-8180
TECO ENERGY, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2052286
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
702 North Franklin Street, Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 228-4111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date (October 31, 1996):
Common Stock, $1 Par Value 117,357,580<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of management, the unaudited consolidated
financial statements include all adjustments (none of which
were other than normal or recurring) necessary to present
fairly the results for the three-month and nine-month periods
ended Sept. 30, 1996 and 1995. Reference should be made to
the explanatory notes affecting the income and balance sheet
accounts contained in TECO Energy, Inc.'s Annual Report on
Form 10-K for the year ended Dec. 31, 1995 and to the notes on
page 7 and 8 of this report.
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FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, Dec. 31,
1996 1995
Assets
Current assets
Cash and cash equivalents $ 17,557 $ 10,259
Short-term investments 33,728 32,176
Receivables, less allowance
for uncollectibles 181,591 163,536
Inventories, at average cost
Fuel 52,441 76,737
Materials and supplies 54,124 48,984
Prepayments 9,248 9,574
348,689 341,266
Property, plant and equipment,
at original cost
Utility plant in service 3,743,012 3,174,526
Construction work in progress 73,804 479,586
Other property 876,909 836,411
4,693,725 4,490,523
Accumulated depreciation (1,727,200) (1,616,231)
2,966,525 2,874,292
Other assets
Other investments 85,575 86,277
Deferred income taxes 76,321 65,906
Deferred charges and other assets 107,182 105,626
269,078 257,809
$3,584,292 $3,473,367
Liabilities and Capital
Current liabilities
Long-term debt due within one year $ 48,499 $ 31,327
Notes payable 387,425 361,340
Accounts payable 149,878 146,313
Customer deposits 52,572 51,273
Interest accrued 26,549 13,297
Taxes accrued 41,357 11,731
706,280 615,281
Deferred income taxes 410,045 396,624
Investment tax credits 57,531 61,347
Regulatory liability-tax related 36,132 47,558
Other deferred credits 161,477 136,092
Long-term debt, less amount due
within one year 950,835 994,856
Preferred stock of Tampa Electric 19,960 54,956
Common equity
Common equity - 400 million shares
authorized, $1 par value - issued and
outstanding 117,326,188 in 1996 and
116,731,681 in 1995 1,314,195 1,240,887
Unearned compensation (72,163) (74,234)
$3,584,292 $3,473,367
The accompanying notes are an integral part of the consolidated
financial statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
For the three months ended Sept. 30, 1996 1995
Revenues $400,842 $389,097
Expenses
Operation 195,058 187,786
Maintenance 24,829 24,563
Depreciation 45,645 41,235
Taxes, other than income 28,945 28,445
294,477 282,029
Income from operations 106,365 107,068
Other income (expense)
Allowance for other funds used
during construction 5,774 3,234
Other income (expense), net (150) (87)
Preferred dividend requirements of
Tampa Electric (220) (892)
5,404 2,255
Income before interest and income taxes 111,769 109,323
Interest charges
Interest expense 23,510 22,318
Allowance for borrowed funds used during
construction (2,359) (1,949)
21,151 20,369
Income before provision for income taxes 90,618 88,954
Provision for income taxes 25,273 25,707
Net income $ 65,345 $ 63,247
Average shares outstanding 117,278 116,517
Earnings per average common share
outstanding $ 0.56 $ 0.55
Dividends per common share outstanding $ 0.28 $ 0.265
The accompanying notes are an integral part of the consolidated
financial statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
For the nine months ended Sept. 30, 1996 1995
Revenues $1,103,458 $1,057,930
Expenses
Operation 554,573 512,825
Maintenance 69,676 74,356
Depreciation 136,043 130,443
Taxes, other than income 88,010 86,456
848,302 804,080
Income from operations 255,156 253,850
Other income (expense)
Allowance for other funds used
during construction 16,218 7,554
Other income, net 1,341 371
Preferred dividend requirements of
Tampa Electric (1,547) (2,676)
16,012 5,249
Income before interest and income taxes 271,168 259,099
Interest charges
Interest expense 69,639 66,735
Allowance for borrowed funds used during
construction (6,627) (4,552)
63,012 62,183
Income before provision for income taxes 208,156 196,916
Provision for income taxes 52,999 50,785
Net income $ 155,157 $ 146,131
Average shares outstanding 117,097 116,392
Earnings per average common share
outstanding $ 1.33 $ 1.26
Dividends per common share outstanding $ 0.825 $ 0.7825
The accompanying notes are an integral part of the consolidated
financial statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the nine months ended Sept. 30, 1996 1995
Cash flows from operating activities
Net income $ 155,157 $ 146,131
Adjustments to reconcile net income
to net cash:
Depreciation 136,043 130,443
Deferred income taxes (13,004) (19,991)
Investment tax credits, net (3,816) (3,964)
Allowance for funds used
during construction (22,845) (12,106)
Amortization of unearned compensation 3,957 3,863
Revenue deferral and refund 38,100 30,962
Deferred recovery clause (426) (13,976)
Amortization of coal contract buyout 2,028 1,352
Receivables, less allowance
for uncollectibles (18,055) (25,960)
Inventories 19,156 30,850
Taxes accrued 29,626 57,837
Interest accrued 13,252 7,452
Accounts payable (21,435) (21,901)
Other 15,536 18,883
333,274 329,875
Cash flows from investing activities
Capital expenditures (228,722) (326,950)
Allowance for funds used
during construction 22,845 12,106
Investment in short-term investments (1,552) 68,854
Other non-current investments 3,086 18,763
(204,343) (227,227)
Cash flows from financing activities
Common stock 11,400 7,758
Proceeds from long-term debt 3,058 620
Repayment of long-term debt (30,089) (5,052)
Net increase (decrease) in short-term debt 26,085 (37,290)
Redemption of preferred stock,
including premium (35,496) --
Dividends (96,591) (91,046)
(121,633) (125,010)
Net increase (decrease) in cash
and cash equivalents 7,298 (22,362)
Cash and cash equivalents
at beginning of period 10,259 35,797
Cash and cash equivalents at end of period $ 17,557 $ 13,435
The accompanying notes are an integral part of the consolidated
financial statements.
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FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
A. TECO Energy, Inc. and its subsidiaries have made certain
commitments in connection with their continuing capital expenditure
program and estimate that capital expenditures, excluding allowance
for funds used during construction (AFUDC), during 1996 will be as
follows:
millions
Tampa Electric Company $182
TECO Transport & Trade Corporation 31
TECO Gas & Oil, Inc. 20
TECO Coal Corporation 14
Other diversified businesses 5
$252
In September 1996, TECO Coal purchased the assets of Kyber
Coal Company for $8 million. The assets include a lease on
approximately 20 million tons of metallurgical quality coal along
with one active contract deep mine.
B. During the first nine months of 1996, Tampa Electric
recognized $38-million of revenue deferrals and refunds pursuant to
a multi-year base rate freeze, revenue deferral and refund plan
(the 1996 Plan) which the Florida Public Service Commission (FPSC)
approved in a final order on May 20, 1996. Tampa Electric deferred
$31 million during the first nine months last year in accordance
with another plan (the 1995 Plan) approved by the FPSC for 1995. A
more complete description of the 1995 Plan and 1996 Plan is
contained in TECO Energy s Annual Report on Form 10-K for the year
ended Dec. 31, 1995.
A total of $89 million of revenue has been recorded on the
balance sheet under the 1995 and 1996 Plans, of which $64 million
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FORM 10-Q
is included in other deferred credits. The remaining $25 million
is classified in accounts payable to reflect the refund to
customers which began Oct. 1, 1996.
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FORM 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three months ended Sept. 30, 1996:
Net income of $65.3 million in the third quarter of 1996 was
$2.1 million or 3 percent higher than in 1995's third quarter due
to strong gas prices at TECO Coalbed Methane, higher capitalized
financing costs (AFUDC) at Tampa Electric and the operation of TECO
Power Services Alborada Power Station in Guatemala.
Consolidated operating income was slightly lower than in
1995's third quarter, which included a $2.6-million pretax gain on
a condemnation sale of land and mineral rights at TECO Coal.
Improved results at TECO Coalbed Methane and TECO Power Services
were more than offset by lower operating income at TECO Coal and
TECO Transport & Trade.
The following table identifies the unconsolidated revenues and
operating income of TECO Energy s significant operating groups.
Contributions by operating group (unconsolidated)
Revenues
(thousands of dollars) 1996 1995
Tampa Electric $311,113 $308,067
Diversified companies $144,633 $135,454
Operating income
(thousands of dollars) 1996 1995
Tampa Electric $ 82,471 $ 81,921
Diversified companies* $ 25,458 $ 26,765
* Operating income includes items that are reclassified for
consolidated financial statement purposes. The principal items are
the non-conventional fuels tax credit related to coalbed methane
production and interest expense of the non-recourse debt related to
independent power operations, both of which are included in
operating income for the diversified companies. In the Consolidated
Statements of Income, the tax credit is part of the provision for
income taxes and the interest is part of interest expense. Certain
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FORM 10-Q
1995 amounts have been restated to conform with the current year
presentation.
Tampa Electric's third quarter operating income of
$82.5 million was slightly higher than in 1995 because of higher
revenues. The 1996 and 1995 results were net of $8 million and $14
million of revenue deferrals, respectively, in accordance with
FPSC-approved plans.
Tampa Electric's revenues for the quarter increased 1 percent
due to higher energy sales and the difference in the level of
revenue deferrals.
Retail energy sales increased 3 percent from 1995 because of
2 percent customer growth and warmer weather.
Tampa Electric's total operating expenses for the third
quarter were unchanged from 1995. Lower fuel expenses from
effective coal contract administration were offset by higher
purchased power expenses from increased energy sales and higher
depreciation.
Unconsolidated operating income for TECO Energy's diversified
companies decreased 5 percent to $25.5 million on revenues of
$144.6 million.
Compared to an exceptionally strong quarter in 1995, TECO
Transport & Trade s operating results were down because of lower
demand in the river business and higher expenses in the ocean
shipping business. The transfer terminal had improved results due
to higher prices for handling export coal.
At TECO Coal, lower volume to Tampa Electric and higher
production costs at the Gatliff mines more than offset increased
sales to outside customers from the Premier operations. TECO Coal
- 10 -<PAGE>
FORM 10-Q
recorded a $1.1-million pretax charge in the quarter related to the
closing of some underground mines at Gatliff.
Favorable gas prices continued to contribute to increased
operating income at TECO Coalbed Methane.
The Alborada Power Station in Guatemala, which began
commercial operation in the third quarter of 1995, provided
improved results at TECO Power Services.
Diversified results in 1996 also included expenses related to
the continued development of TECO Gas & Oil and TeCom.
Consolidated interest expense before the allowance for
borrowed funds used during construction was up 5 percent due to
higher levels of short-term debt, interest accrued on the revenue
deferrals and the effect of the expiration of an interest rate swap
agreement.
Total AFUDC increased in 1996 to $8 million from $5 million in
1995 from the additional investment in Tampa Electric s Polk Power
Station which was declared in service Sept. 30, 1996.
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FORM 10-Q
Nine months ended Sept. 30, 1996:
Net income of $155.2 million in the first nine months of 1996
was $9.0 million or 6 percent higher than in 1995's nine-month
period. Tampa Electric contributed to net income with higher AFUDC
and increased energy sales. TECO Power Services, TECO Coalbed
Methane and TECO Transport & Trade also had improved results.
Consolidated operating income was up slightly from 1995's
first nine months due to strong performances by TECO Power
Services, TECO Coalbed Methane and TECO Transport & Trade,
partially offset by lower operating income at Tampa Electric and
TECO Coal. The first nine months of 1996 also included expenses
related to the continued development of TECO Gas & Oil and TeCom,
and 1995's results included a $1.2-million gain on the sale of an
apartment complex by TECO Properties.
The following table identifies the unconsolidated revenues and
operating income of TECO Energy s significant operating groups.
Contributions by operating group (unconsolidated)
Revenues
(thousands of dollars) 1996 1995
Tampa Electric $838,278 $840,957
Diversified companies $417,953 $372,250
Operating income
(thousands of dollars) 1996 1995
Tampa Electric $185,711 $188,240
Diversified companies* $ 74,858 $ 69,961
* Operating income includes items that are reclassified for
consolidated financial statement purposes. The principal items are
the non-conventional fuels tax credit related to coalbed methane
production and interest expense of the non-recourse debt related to
independent power operations, both of which are included in
operating income for the diversified companies. In the
Consolidated Statements of Income, the tax credit is part of the
provision for income taxes and the interest is part of interest
expense. Certain 1995 amounts have been restated to conform with
the current year presentation.
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FORM 10-Q
Tampa Electric's operating income of $185.7 million for the
nine months was 1 percent lower than in 1995. The 1996 results
were net of $38 million of revenue deferrals and refunds in
accordance with the 1996 Plan. Operating income last year was net
of a $31-million revenue deferral in accordance with the 1995 Plan.
Tampa Electric's revenues in the first nine months decreased,
despite higher retail energy sales, because of the elimination of
the oil backout recovery clause pursuant to the 1995 Plan, higher
revenue deferrals and lower fuel charges to customers. Retail
energy sales increased 4 percent reflecting favorable weather,
customer growth of more than 2 percent and a strong local economy.
Tampa Electric's total operating expenses for the first nine
months of 1996 were unchanged from 1995. Lower fuel expenses from
effective coal contract administration were offset by higher
purchased power and depreciation expense.
Unconsolidated operating income for TECO Energy's diversified
companies increased 7 percent to $74.9 million on revenues of
$418.0 million.
At TECO Transport & Trade, increased movements of coal and
phosphate by its ocean fleet, and strong demand and pricing in the
river business contributed to improved operating results.
Despite TECO Coal s increased coal sales to outside customers,
operating results were down because sales to Tampa Electric were
lower, production costs were higher and 1995's results included a
$2.6-million gain from the sale of land and mineral rights under a
condemnation settlement.
At TECO Coalbed Methane, higher natural gas prices caused
operating income to increase over 1995's results, which included a
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FORM 10-Q
$4.4-million pretax gain from a gas contract termination
settlement.
TECO Power Services results improved from the new Alborada
Power Station in Guatemala, which began commercial operation in the
third quarter of 1995.
Diversified results also included expenses related to the
continued development of TECO Gas & Oil and TeCom.
Consolidated interest expense before the allowance for
borrowed funds used during construction was up 4 percent due to
higher levels of short-term debt, interest accrued on the revenue
deferrals and refunds and the effect of the expiration of an
interest rate swap agreement.
Total AFUDC increased in 1996 to $23 million from $12 million
in 1995 from the additional investment in Tampa Electric s Polk
Power Station which was declared in service Sept. 30, 1996.
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FORM 10-Q
Liquidity, Capital Resources and Changes in Financial Condition
The FPSC issued a final order in May 1996 approving a multi-
year base rate freeze, revenue deferral and refund plan. The plan
was set forth in an agreement among Tampa Electric, the Office of
Public Counsel (OPC) and the Florida Industrial Power Users Group
(FIPUG) covering the years 1996 through 1998. A more complete
description of the 1996 Plan is contained in TECO Energy s Annual
Report on Form 10-K for the year ended Dec. 31, 1995.
In October 1996, the FPSC issued a final order approving an
agreement among Tampa Electric, OPC and FIPUG which resolved all of
the pending regulatory issues related to a prudence review of Tampa
Electric s new Polk Power Station. This agreement provides for
full recovery of the capital costs not to exceed one percent above
$506 million, and all operation and maintenance expenses associated
with the Polk Power Station. The agreement extends through 1999
the base rate freeze approved in the 1996 Plan. Customers will
also benefit from a $25 million temporary base rate reduction to be
reflected as a credit on customer bills over a 15-month period
beginning Oct. 1, 1997. This temporary rate reduction will offset
refunds which might otherwise have been made in 1999 under the 1996
Plan. In addition, customers will be refunded 60 percent of the
revenues generated in 1999 which contribute to a return on equity
between 12.00 percent and 12.75 percent, and all 1999 revenues
which contribute to a return on equity above 12.75 percent.
Fuel inventory declined from Dec. 31, 1995 due to increased
energy sales at Tampa Electric and effective management of
inventory levels.
- 15 -<PAGE>
FORM 10-Q
The increase in other deferred credits primarily reflected the
revenue deferrals at Tampa Electric related to the 1996 Plan and
1995 Plan.
Accounts payable as of Sept. 30, 1996 included a $25-million
refund to Tampa Electric customers to be made over the 12-month
period beginning Oct. 1, 1996 under the 1996 Plan. This refund
consists of $15 million from 1996's revenues and $10 million of
revenues deferred from 1995.
The decrease in preferred stock reflected Tampa Electric s
redemption of $35 million aggregate par value of preferred stock in
April 1996.
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FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of earnings per common share.
27. Financial data schedule. (EDGAR filing only)
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated
Sept. 25, 1996 reporting under "Item 5. Other Events" on the
agreement among Tampa Electric Company, the Office of Public
Counsel and the Florida Industrial Power Users Group to
resolve all regulatory issues related to a prudence review
of Tampa Electric Company s Polk Power Station, extend the
current base rate freeze through 1999 and provide for a
temporary reduction in base rates.
The registrant filed a Current Report on Form 8-K dated Oct.
9, 1996 reporting under "Item 5. Other Events" on the
Florida Public Service Commission s vote to approve the
agreement among Tampa Electric Company, the Office of Public
Counsel and the Florida Industrial Power Users Group which
resolves all regulatory issues related to a prudence review
of Tampa Electric Company s Polk Power Station, extends the
current base rate freeze through 1999 and provides for a
temporary reduction in base rates.
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FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TECO ENERGY, INC.
(Registrant)
Date: November 13, 1996 By: /s/ A. D. Oak
A. D. Oak
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
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FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
11. Computation of earnings per common share 20
27. Financial data schedule (EDGAR filing only) --
- 19 -<PAGE>
Exhibit 11
TECO ENERGY, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three months ended Sept. 30, 1996 1995
Primary Fully Diluted Primary Fully Diluted
Earnings Earnings Earnings Earnings
Net income (000) $ 65,345 $ 65,345 $ 63,247 $ 63,247
Common shares outstanding
at beginning of period 117,223,044 117,223,044 116,459,568 116,459,568
Dividend reinvestment and
common stock purchase plan:
Shares issued 46,808 46,808 51,193 51,193
Restricted stock granted -- -- -- --
Stock option plans:
Options exercised 7,725 7,725 6,621 6,621
Shares under option at
end of period -- 2,522,572 -- 2,506,172
Treasury shares which could
be purchased -- (2,076,370) -- (2,021,613)
Avg. no. of shares
outstanding 117,277,577 117,723,779 116,517,382 117,001,941
Earnings per share $ 0.56 $ 0.56 $ 0.55 $ 0.54
Nine months ended Sept. 30, 1996 1995
Primary Fully Diluted Primary Fully Diluted
Earnings Earnings Earnings Earnings
Net income (000) $ 155,157 $ 155,157 $ 146,131 $ 146,131
Common shares outstanding
at beginning of period 116,731,681 116,731,681 116,199,423 116,199,423
Dividend reinvestment and
common stock purchase plan:
Shares issued 143,061 143,061 167,605 167,605
Restricted stock granted 47,760 47,760 -- --
Stock option plans:
Options exercised 174,633 174,633 25,330 25,330
Shares under option at
end of period -- 2,522,572 -- 2,506,172
Treasury shares which could
be purchased -- (2,038,723) -- (2,021,613)
Avg. no. of shares
outstanding 117,097,135 117,580,984 116,392,358 116,876,917
Earnings per share $ 1.33 $ 1.32 $ 1.26 $ 1.25
- 20 -<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TECO
ENERGY, INC. CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME
AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000350563
<NAME> TECO Energy, Inc.
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,446,784
<OTHER-PROPERTY-AND-INVEST> 519,741
<TOTAL-CURRENT-ASSETS> 348,689
<TOTAL-DEFERRED-CHARGES> 183,503
<OTHER-ASSETS> 85,575
<TOTAL-ASSETS> 3,584,292
<COMMON> 117,326
<CAPITAL-SURPLUS-PAID-IN> 355,167
<RETAINED-EARNINGS> 841,702
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,314,195
0
19,960
<LONG-TERM-DEBT-NET> 950,835
<SHORT-TERM-NOTES> 2,025
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 385,400
<LONG-TERM-DEBT-CURRENT-PORT> 48,499
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 863,378
<TOT-CAPITALIZATION-AND-LIAB> 3,584,292
<GROSS-OPERATING-REVENUE> 1,103,458
<INCOME-TAX-EXPENSE> 52,999
<OTHER-OPERATING-EXPENSES> 848,302
<TOTAL-OPERATING-EXPENSES> 848,302
<OPERATING-INCOME-LOSS> 255,156
<OTHER-INCOME-NET> 17,559
<INCOME-BEFORE-INTEREST-EXPEN> 271,168
<TOTAL-INTEREST-EXPENSE> 63,012
<NET-INCOME> 156,704
1,547
<EARNINGS-AVAILABLE-FOR-COMM> 155,157
<COMMON-STOCK-DIVIDENDS> 96,591
<TOTAL-INTEREST-ON-BONDS> 32,388
<CASH-FLOW-OPERATIONS> 333,274
<EPS-PRIMARY> 1.33
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