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, 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 1-8180
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 (April 30, 1997):
Common Stock, $1 Par Value 117,727,694<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 periods ended March 30, 1997 and 1996. 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, 1996 and to the
notes on pages 6 and 7 of this report.
- 2 -<PAGE>
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, Dec. 31,
1997 1996
Assets
Current assets
Cash and cash equivalents $ 22,031 $ 12,178
Short-term investments 6 6
Receivables, less allowance
for uncollectibles 161,286 190,093
Inventories, at average cost
Fuel 70,079 62,215
Materials and supplies 56,915 55,860
Prepayments 7,099 8,921
317,416 329,273
Property, plant and equipment,
at original cost
Utility plant in service 3,802,355 3,784,667
Construction work in progress 55,251 45,443
Other property 896,495 891,510
4,754,101 4,721,620
Accumulated depreciation (1,809,309) (1,764,965)
2,944,792 2,956,655
Other assets
Other investments 85,803 86,425
Deferred income taxes 77,937 76,702
Deferred charges and other assets 118,875 111,664
282,615 274,791
$3,544,823 $3,560,719
Liabilities and Capital
Current liabilities
Long-term debt due within one year $ 76,847 $ 76,664
Notes payable 261,600 305,744
Accounts payable 131,402 150,326
Customer deposits 53,458 52,867
Interest accrued 27,901 16,212
Taxes accrued 14,047 9,758
565,255 611,571
Deferred income taxes 420,508 426,724
Investment tax credits 55,008 56,260
Regulatory liability-tax related 35,526 35,770
Other deferred credits 150,937 152,111
Long-term debt, less amount due
within one year 1,022,986 996,290
Preferred stock of Tampa Electric 19,960 19,960
Common equity
Common equity - 400 million shares
authorized, $1 par value - issued and
outstanding 117,596,494 in 1997 and
117,552,907 in 1996 1,344,067 1,332,774
Unearned compensation (69,424) (70,741)
$3,544,823 $3,560,719
The accompanying notes are an integral part of the consolidated financial
statements.
- 3 -<PAGE>
FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
For the three months ended March 31, 1997 1996
Revenues $363,502 $341,141
Expenses
Operation 175,485 177,070
Maintenance 22,707 20,903
Depreciation 51,226 44,963
Taxes, other than income 31,052 30,056
280,470 272,992
Income from operations 83,032 68,149
Other income (expense)
Allowance for other funds used
during construction 47 5,019
Other income (expense), net 86 1,410
Preferred dividend requirements of
Tampa Electric (220) (892)
(87) 5,537
Income before interest and income taxes 82,945 73,686
Interest charges
Interest expense 23,520 22,670
Allowance for borrowed funds used during
construction (18) (2,051)
23,502 20,619
Income before provision for income taxes 59,443 53,067
Provision for income taxes 16,347 11,558
Net income $ 43,096 $ 41,509
Average shares outstanding 117,586 116,889
Earnings per average common share
outstanding $ 0.37 $ 0.36
Dividends paid per common share outstanding $ 0.28 $ 0.265
The accompanying notes are an integral part of the consolidated financial
statements.
- 4 -<PAGE>
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the three months ended March 31, 1997 1996
Cash flows from operating activities
Net income $ 43,096 $ 41,509
Adjustments to reconcile net income
to net cash:
Depreciation 51,226 44,963
Deferred income taxes (7,497) (10,883)
Investment tax credits, net (1,252) (1,309)
Allowance for funds used
during construction (65) (7,070)
Amortization of unearned compensation 1,317 1,072
Deferred revenues (7,283) 20,869
Deferred recovery clause 5,109 1,365
Refunded to customers (5,888) --
Amortization of coal contract buyout 676 676
Receivables, less allowance
for uncollectibles 28,807 2,455
Inventories (8,919) 13,729
Taxes accrued 4,289 28,487
Interest accrued 11,689 10,697
Accounts payable (13,036) (47,510)
Other (3,922) 8,582
98,347 107,632
Cash flows from investing activities
Capital expenditures (39,319) (64,938)
Allowance for funds used
during construction 65 7,070
Investment in short-term investments -- (585)
Other non-current investments 422 2,879
(38,832) (55,574)
Cash flows from financing activities
Common stock 590 4,888
Proceeds from long-term debt 29,300 3,058
Repayment of long-term debt (2,482) (1,880)
Net decrease in short-term debt (44,144) (23,660)
Dividends (32,926) (30,975)
(49,662) (48,569)
Net increase in cash and cash equivalents 9,853 3,489
Cash and cash equivalents
at beginning of period 12,178 10,259
Cash and cash equivalents at end of period $ 22,031 $ 13,748
The accompanying notes are an integral part of the consolidated financial
statements.
- 5 -<PAGE>
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 during 1997 will be as
follows:
millions
Tampa Electric Company $122
TECO Transport & Trade Corporation 22
TECO Oil & Gas, Inc. 15
TECO Coal Corporation 9
TECO Power Services 8
Other diversified businesses 4
$180
B. In May, TECO Energy sold exchange-based futures contracts to hedge
the price risk for substantially all of the estimated natural gas
production of TECO Coalbed Methane and TECO Oil & Gas for June, July and
August of this year. These contracts, at an average price of $2.33 per
Mcf, cover expected monthly production of 1.9 Bcf.
C. During the first three months of 1997, Tampa Electric recognized
$7.3 million of revenues that had been deferred in 1995 and 1996
pursuant to regulatory agreements approved by the Florida Public Service
Commission. Tampa Electric deferred $20.9 million of revenues during
the first three months last year. The utility also refunded to
customers $5.9 million of previously deferred revenues during the first
quarter of this year in accordance with the agreements.
As of March 31, 1997, $53 million of deferred revenues were
included in other deferred credits. An additional $13.7 million were
classified in accounts payable to reflect the remaining amount to be
refunded to customers through September 1997.
- 6 -<PAGE>
FORM 10-Q
D. As previously disclosed in its Annual Report on Form 10-K for the
year ended Dec. 31, 1996, TECO Energy entered into an Agreement and Plan
of Merger with Lykes Energy, Inc. ( Lykes Energy ) on Nov. 21, 1996.
Concurrent with this merger, Lykes Energy s natural gas distribution
subsidiary will be merged into Tampa Electric. Completion of the
mergers is expected to occur by mid-year 1997.
- 7 -<PAGE>
FORM 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three months ended March 31, 1997:
Net income of $43.1 million in the first quarter of 1997 was
$1.6 million or 4 percent higher than in 1996's first quarter as
improved results at Tampa Electric and TECO Coal more than offset the
absence of capitalized financing costs (AFUDC).
Consolidated operating income was up 22 percent from 1996's first
quarter primarily due to the regulatory agreements at Tampa Electric and
higher results at TECO Coal.
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) 1997 1996
(1) (2)
Tampa Electric $272,786 $254,746
Diversified companies $140,103 $132,533
Operating income
(thousands of dollars) 1997 1996
Tampa Electric $ 57,847 $ 43,468
Diversified companies* $ 27,027 $ 27,011
(1)
Tampa Electric recognized $7.3 million of revenues previously
deferred. See Note B on page 6.
(2)
Tampa Electric s revenues were net of $20.9 million of deferred
revenues. See Note B on page 6.
* 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 limited-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 1996 amounts have been restated to
conform with the current year presentation.
- 8 -<PAGE>
FORM 10-Q
Tampa Electric's first quarter operating income of $57.8 million
was higher than in 1996 because of the company s regulatory agreements
and the completion of Polk Unit One and its inclusion in rate base for
earnings purposes.
Tampa Electric s revenues increased 7 percent this year as the
company recognized $7 million of previously deferred revenues under the
company s regulatory agreements, while $21 million of revenues were
deferred last year under these agreements.
The company's revenues before the recognition of deferred revenues
this year decreased 4 percent from last year s revenues before the
revenue deferral due to lower retail energy sales. Retail sales
declined 5 percent as customer growth of 2.3 percent was more than
offset by the effects of mild winter weather in 1997 compared to colder
than normal weather in 1996.
Tampa Electric's operating expenses for the first quarter were 2
percent higher than in 1996 primarily as a result of the operation of
Polk Unit One.
Unconsolidated operating income from TECO Energy's diversified
companies was level with last year s results at $27.0 million. Revenues
were $140.1 million versus $132.5 million in 1996 primarily due to gas
sales at TECO Oil & Gas and increased third-party sales at TECO Coal.
TECO Coal s operating income increased due to higher volumes to
outside customers and improved prices, particularly for specialty coal.
At TECO Coalbed Methane, lower operating costs and higher Section
29 tax credits offset the effects of slightly lower production and
prices.
- 9 -<PAGE>
FORM 10-Q
At TECO Power Services, the Alborada Power Station in Guatemala
and the Hardee Power Station in Florida continued to operate well,
producing operating income consistent with last year s results.
High-water conditions on the Ohio and Mississippi River systems
and higher operating expenses resulted in lower operating income at TECO
Transport & Trade.
TECO Oil & Gas operated at break-even for the quarter as increased
production was offset by higher costs associated with continued
exploration efforts. To date, TECO Oil & Gas has participated in 11
exploratory offshore wells and one onshore well. Seven of the offshore
wells found hydrocarbons, of which five are producing. One previously
producing offshore well has been determined not to be economical and has
been plugged. The onshore well, drilled in April 1997, found
hydrocarbons.
At TeCom, product development costs are being capitalized because
of a continued high level of product enhancement activity in 1997. In
the first quarter TeCom capitalized $1.3 million pretax of development
costs compared with $1.0 million expensed during the same period in
1996.
Consolidated interest expense before the allowance for borrowed
funds used during construction was up 4 percent due to higher levels of
long-term debt and interest accrued on revenue deferrals.
Total AFUDC decreased in 1997 because Tampa Electric s Polk Power
Station began commercial service at the end of 1996's third quarter.
The effective income tax rate for the first quarter was
27.4 percent compared to 21.4 percent last year, primarily due to lower
AFUDC-other in 1997.
- 10 -<PAGE>
FORM 10-Q
Liquidity, Capital Resources and Changes in Financial Condition
Fuel inventory increased reflecting the seasonal build-up in
anticipation of summer generation.
Long-term debt increased due to the $29-million limited-recourse
financing for TECO Power Services Alborada Power Station, completed in
early 1997. This funding also contributed to lower notes payable
balances.
In March 1997, TECO Coal leased the mining rights to approximately
10 million tons of high-quality coal reserves in eastern Kentucky on
property contiguous to its Premier Elkhorn operation. The transaction
also provides TECO Coal the right to use a preparation plant and a rail
loadout facility which will add about 1 million tons annually to Premier
Elkhorn s capacity.
As described in Note B on page 6, TECO Energy sold futures
contracts in May to hedge the price risk for 1.9 Bcf of natural gas
production per month for June, July and August of this year.
Tampa Electric currently anticipates that, concurrent with the
merger of Lykes Energy into TECO Energy, Tampa Electric will redeem all
outstanding shares of Series A, B and D $100 par value Preferred Stock
at the applicable per share redemption prices, plus accrued but unpaid
dividends to the date of redemption. Also at that time, Lykes Energy s
natural gas distribution subsidiary will be merged into Tampa Electric.
- 11 -<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on April 16,
1997, the shareholders of TECO Energy, Inc. elected five
directors and voted to approve the 1997 Director Equity Plan.
The votes were as follows:
Votes Cast Votes Cast
For Against Abstentions
Election of Directors
Sara L. Baldwin 98,482,728 2,825,608
H. L. Culbreath 98,462,662 2,845,674
Edward L. Flom 98,497,266 2,811,070
Henry R. Guild, Jr. 98,488,864 2,819,472
William P. Sovey 98,729,913 2,578,423
1997 Director
Equity Plan 89,346,266 9,969,232 1,992,753
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
No reports on Form 8-K were filed during the quarter to which
this report relates.
The registrant filed a Current Report on Form 8-K dated
April 16, 1997 reporting under "Item 5. Other Events" on the
shareholder approval of the regisrant s 1997 Director Equity
Plan as an amendment and restatement of the registrant s 1991
Director Stock Option Plan.
- 12 -<PAGE>
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: May 14, 1997 By: /s/ A. D. Oak
A. D. Oak
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
- 13 -<PAGE>
FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
11. Computation of earnings per common share 15
27. Financial data schedule (EDGAR filing only) --
- 14 -<PAGE>
Exhibit 11
TECO ENERGY, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three months ended March 31, 1997 1996
Primary Fully Diluted Primary Fully Diluted
Earnings Earnings Earnings Earnings
Net income (000) $ 43,096 $ 43,096 $ 41,509 $ 41,509
Common shares outstanding
at beginning of period 117,552,907 117,552,907 116,731,681 116,731,681
Dividend reinvestment and
common stock purchase plan:
Shares issued -- -- 44,582 44,582
Restricted stock granted -- -- -- --
Shares canceled (1,303) (1,303) -- --
Stock option plans:
Options exercised 34,750 34,750 112,503 112,503
Shares under option at
end of period -- 2,452,872 -- 2,268,772
Treasury shares which could
be purchased -- (2,016,848) -- (1,705,496)
Avg. no. of shares
outstanding 117,586,354 118,022,378 116,888,766 117,452,042
Earnings per share $ 0.37 $ 0.37 $ 0.36 $ 0.35
- 15 -<PAGE>
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<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.
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<NAME> TECO Energy, Inc.
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<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
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<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,444,824
<OTHER-PROPERTY-AND-INVEST> 499,968
<TOTAL-CURRENT-ASSETS> 317,416
<TOTAL-DEFERRED-CHARGES> 196,812
<OTHER-ASSETS> 85,803
<TOTAL-ASSETS> 3,544,823
<COMMON> 117,596
<CAPITAL-SURPLUS-PAID-IN> 360,893
<RETAINED-EARNINGS> 865,578
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,344,067
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<LONG-TERM-DEBT-NET> 1,022,986
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<LONG-TERM-NOTES-PAYABLE> 0
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