<PAGE> 1
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, 2000
---------------------------------------------
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 1-8180
TECO ENERGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2052286
- ------------------------------- ----------------------
(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, 2000):
Common Stock, $1 Par Value 125,276,859
Index to Exhibits Appears on Page 17
Page 1 of 18
<PAGE> 2
FORM 10-Q
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 results for the three-month periods ended March
31, 2000 and 1999. 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, 1999 and to the notes on pages 6
through 9 of this report.
2
<PAGE> 3
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
MARCH 31, DEC. 31,
2000 1999
UNAUDITED AUDITED
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 21.7 $ 97.5
Receivables, less allowance for uncollectibles 263.0 261.9
Inventories, at average cost
Fuel 109.4 84.0
Materials and supplies 71.8 69.5
Prepayments 19.8 18.9
-------- --------
485.7 531.8
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
Utility plant in service
Electric 4,292.4 4,140.9
Gas 609.7 590.0
Construction work in progress 235.9 291.1
Other property 1,049.6 1,042.4
-------- --------
6,187.6 6,064.4
Accumulated depreciation (2,476.7) (2,436.6)
-------- --------
3,710.9 3,627.8
-------- --------
OTHER ASSETS
Other investments 136.5 117.2
Investment in unconsolidated affiliates 107.5 103.3
Deferred income taxes 108.9 106.8
Deferred charges and other assets 221.5 203.2
-------- --------
574.4 530.5
-------- --------
$4,771.0 $4,690.1
======== ========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES
Long-term debt due within one year $ 122.4 $ 155.8
Notes payable 940.1 813.7
Accounts payable 191.1 218.1
Customer deposits 81.2 80.7
Interest accrued 28.0 16.4
Taxes accrued 74.1 36.9
-------- --------
1,436.9 1,321.6
DEFERRED INCOME TAXES 506.1 509.4
INVESTMENT TAX CREDITS 40.5 41.7
REGULATORY LIABILITY-TAX RELATED 12.1 13.3
OTHER DEFERRED CREDITS 153.7 178.5
LONG-TERM DEBT, LESS AMOUNT DUE WITHIN ONE YEAR 1,215.1 1,207.8
COMMON EQUITY
Common equity - 400 million shares authorized,
$1 par value - outstanding 125,236,894 in 2000 (after
deducting 7,000,000 shares in Treasury, at a cost of $143.8
million) and 126,655,567 in 1999 (after deducting
5,435,100 shares in Treasury, at a cost of $114.8 million) 1,458.9 1,472.5
Unearned compensation (52.3) (54.7)
-------- --------
$4,771.0 $4,690.1
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(MILLIONS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999
-------- --------
REVENUES $ 524.5 $ 445.7
-------- --------
EXPENSES
Operation 279.6 226.3
Maintenance 35.9 27.5
Depreciation 62.0 58.0
Taxes, other than income 38.9 37.8
-------- --------
416.4 349.6
-------- --------
INCOME FROM OPERATIONS 108.1 96.1
OTHER INCOME
Other income, net 1.8 0.7
-------- --------
INCOME BEFORE INTEREST AND INCOME TAXES 109.9 96.8
INTEREST EXPENSE 35.7 26.1
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 74.2 70.7
Provision for income taxes 20.7 21.2
-------- --------
NET INCOME FROM CONTINUING OPERATIONS 53.5 49.5
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME
TAX BENEFIT OF $.5 MILLION FOR 1999 -- (0.9)
GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS, NET OF
INCOME TAX EXPENSE OF $.3 MILLION FOR 1999 -- .6
-------- --------
NET INCOME $ 53.5 $ 49.2
======== ========
Average common shares outstanding - basic 126.2 132.0
======== ========
Average common shares outstanding -diluted 126.2 132.2
======== ========
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
From continuing operations
Basic and Diluted $ 0.42 $ 0.38
======== ========
Net income
Basic and Diluted $ 0.42 $ 0.38
======== ========
DIVIDEND PER COMMON SHARE OUTSTANDING $ 0.325 $ 0.31
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(MILLIONS)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 53.5 $ 49.2
Adjustments to reconcile net income to net cash
Depreciation 62.0 58.0
Deferred income taxes (6.2) (10.9)
Investment tax credits, net (1.2) (1.2)
Allowance for funds used during construction (0.5) --
Amortization of unearned compensation 2.4 2.0
Equity in earnings of unconsolidated affiliates (4.1) (1.1)
Deferred revenue -- 1.4
Deferred recovery clause 3.5 2.0
Receivables, less allowance for uncollectibles (1.1) (1.0)
Inventories (27.7) (24.5)
Taxes accrued 37.2 52.1
Interest accrued 11.7 8.9
Accounts payable (27.0) (64.8)
Other 4.7 1.9
------ ------
107.2 72.0
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (144.6) (76.0)
Allowance for funds used during construction 0.5 --
Purchase of minority interest (52.6) --
Investment in unconsolidated affiliates (0.1) (11.7)
Other non-current investments (19.3) (0.7)
------ ------
(216.1) (88.4)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock 2.5 --
Purchase of treasury stock (29.0) --
Proceeds from long-term debt 6.9 --
Repayment of long-term debt (32.6) (2.9)
Net increase in short-term debt 126.4 57.0
Dividends (41.1) (40.9)
------ ------
33.1 13.2
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (75.8) (3.2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 97.5 16.8
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21.7 $ 13.6
====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE> 6
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The company has adopted FAS 130, Reporting Comprehensive
Income. This standard requires that comprehensive income, which
includes net income as well as certain changes in assets and
liabilities recorded in common equity, be reported in the financial
statements. There were no components of comprehensive income other than
net income for the three-month periods ended March 31, 2000 and 1999.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
B. As reported in the company's Annual Report on Form 10-K for
the year ended Dec. 31, 1999, the assets of TeCom were sold for $1.0
million in cash to Invensys Intelligent Building Systems, a division of
the Barber-Colman Company. The company decided to exit the automated
energy management systems business because it lacked the distribution
channels necessary to effectively reach the markets for its products.
TECO Energy reported a net after-tax loss on disposal of discontinued
operations of $12.9 million in the third quarter of 1999.
As a result of the company's intention to sell this business,
all activities of the subsidiary through Sept. 1, 1999, the measurement
date, were reported as discontinued operations on the Consolidated
Statements of Income. After-tax losses from discontinued operations
were $0.9 million for the three months ended March 31, 1999.
Total revenues from discontinued operations related to TeCom
were $0.7 million for the three-month period ended March 31, 1999.
There were no revenues reported for the first quarter of 2000.
C. A $0.6 million after-tax gain on disposal of discontinued
operations was recorded in the first quarter of 1999 relating to the
sale of TECO Oil & Gas Inc.'s offshore assets to American Resources
Offshore, Inc. previously reported in the company's Annual Reports
on Form 10-K for the years ended Dec. 31, 1998 and 1999. There were
no significant revenues from the discontinued oil and gas operations
in 2000 or 1999.
D. TECO Energy and its subsidiaries have made certain commitments
in connection with their continuing capital expenditure program and
estimate that capital expenditures for continuing operations during
2000 will be as follows:
millions
--------
Tampa Electric Company
Tampa Electric division $234
Peoples Gas System division 66
TECO Power Services Corporation 148
TECO Transport Corporation 27
TECO Coal Corporation 50
Other diversified businesses 12
----
$537
====
TECO Power Services Corporation -
investment in unconsolidated affiliates $ 34
====
Tampa Electric Company is a potentially responsible party for
certain superfund sites, and through its Peoples Gas System division,
for certain manufactured gas plant sites. While the joint and several
liability associated with these sites presents the potential for
significant response costs, Tampa Electric Company estimates its
ultimate financial liability at approximately $20 million over the next
10 years. The environmental remediation costs associated with these
sites are not expected to have a significant impact on customer prices.
6
<PAGE> 7
FORM 10-Q
E. Revenues in the first quarter of 1999 reflected the deferral
for refund of $1.4 million of electric revenues at Tampa Electric.
These deferred revenues resulted from Tampa Electric's regulatory
agreement that ended on Dec. 31, 1999. Tampa Electric expects the
Florida Public Service Commission (FPSC) staff to closely monitor the
company's achieved return on equity during 2000, but not to require
Tampa Electric to negotiate a new regulatory plan. The Florida
Industrial Power Users Group (FIPUG) protested the FPSC decisions for
Tampa Electric's 1997 and 1998 earnings under the deferred revenue
stipulation, including the FPSC decision to cap the company's equity
ratio at 58.7-percent. A hearing is scheduled for August 2000.
F. The reconciliation of basic and diluted earnings per share is
shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
(Millions, except per share amounts) ------ ------
<S> <C> <C>
Numerator (Basic and Diluted)
Net income from continuing operations $ 53.5 $ 49.5
Net income $ 53.5 $ 49.2
Denominator
Average number of shares outstanding - basic 126.2 132.0
Plus: incremental shares for assumed
conversions: Stock options at end of period 0.4 1.2
Less: Treasury shares which could be purchased (0.4) (1.0)
------ ------
Average number of shares outstanding - diluted 126.2 132.2
====== ======
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic and Diluted $ 0.42 $ 0.38
EARNINGS PER SHARE
Basic and Diluted $ 0.42 $ 0.38
</TABLE>
G. In late September 1999, TECO Energy, Inc. announced a program
to repurchase up to $150 million of its outstanding common stock.
Shares acquired constitute treasury shares. In the first quarter of
2000, the company acquired 1.6 million shares of its outstanding common
stock at a cost of $29.0 million; the average per share price was
$18.56. Since the program was announced, the company has acquired 7.0
million shares of its outstanding common stock at a cost of $143.8
million at an average per share price of $20.55. The company's share
repurchase program favorably impacted earnings per share in the first
quarter 2000 by approximately $.01.
H. In February 2000, TECO Energy, Inc. entered into an agreement
to form a joint venture to combine its Peoples Gas Company (PGC)
propane operations with the propane operations of Atmos Energy
Corporation, AGL Resources, Inc. and Piedmont Natural Gas Company, Inc.
The combined entity, to be named US Propane, L.P., would be among the
ten largest propane retailers in the nation, with nearly 200,000
customers. Focused on the Southeast, US Propane will have operations in
Alabama, Florida, Georgia, Kentucky, North Carolina, South Carolina and
Tennessee. The joint venture is expected to allow PGC and the other
participating companies to improve their regional competitiveness. This
transaction is subject to regulatory approval for one of the proposed
participants and other customary conditions. The participating
companies expect this transaction to be completed mid-2000.
7
<PAGE> 8
FORM 10-Q
I. On Jan. 25, 2000, TM Power Ventures L.L.C. acquired for $19.5
million, an additional 13.35- percent ownership interest in its Czech
Republic project, the Energy Center Kladno (ECK) Generating Project,
from one of its partners, increasing TMPV's ownership interest in this
project to 26.7 percent. The ECK Generating Project's two 125-megawatt
units commenced commercial operation on Feb. 1, 2000.
On Feb. 11, 2000, TECO Power Services Corporation (TPS),
through a wholly owned subsidiary, completed the transactions to
acquire the remaining 33-percent ownership interest in the San Jose
Power Station from Coastal Power Company for $52.6 million, increasing
TPS' ownership interest to 100 percent. TPS' total investment in the
project is $192 million, including $53 million of goodwill. The San
Jose Power Station began commercial operation in mid-January 2000.
J. The management of TECO Energy determined its reportable
segments based on each subsidiary's contribution of revenues, operating
income and total assets. All significant intercompany transactions are
eliminated in the consolidated financial statements of TECO Energy but
are included in determining reportable segments.
CONTRIBUTIONS BY BUSINESS SEGMENT (MILLIONS)
OPERATING NET
REVENUES(1) INCOME(1) INCOME(1)
----------- --------- ---------
THREE MONTHS ENDED MARCH 31, 2000
Tampa Electric Company
Electric division (2) (3) $292.6 $ 58.4 $ 28.6
Peoples Gas System 86.6 16.8 8.5
------ ------ ------
379.2 75.2 37.1
TECO Transport (4) 66.4 14.4 7.9
TECO Coal (5) 50.9 2.0 1.4
TECO Power Services (6) (7) 41.7 9.5 9.6
Other diversified businesses (6) 35.8 9.1 6.8
------ ------ ------
574.0 110.2 62.8
Other and eliminations (49.5) (2.1) (9.3)
------ ------ ------
TECO Energy consolidated $524.5 $108.1 $ 53.5
====== ====== ======
THREE MONTHS ENDED MARCH 31, 1999
Tampa Electric Company
Electric division (2) (3) $260.9 $ 55.2 $ 27.3
Peoples Gas System 71.1 14.7 7.3
------ ------ ------
332.0 69.9 34.6
TECO Transport (4) 57.6 11.2 6.3
TECO Coal (5) 53.1 5.2 3.8
TECO Power Services (6) (7) 23.8 4.8 3.3
Other diversified businesses (6) 23.1 7.4 6.2
------ ------ ------
489.6 98.5 54.2
Other and eliminations (43.9) (2.4) (4.7)
------ ------ ------
TECO Energy consolidated $445.7 $ 96.1 $ 49.5
====== ====== ======
(1) From continuing operations.
(2) The Electric division deferred revenues of $1.4 million in 1999 for
refund to customers. See Note E on page 7.
(3) Revenues from sales to affiliates were $5.4 million and $4.2
million for the three-months ended March 31, 2000 and 1999,
respectively.
8
<PAGE> 9
FORM 10-Q
(4) Revenues from sales to affiliates were $35.0 million and $25.1
million for the three-months ended March 31, 2000 and 1999,
respectively.
(5) Revenues from sales to affiliates were $6.4 million for the
three-months ended March 31, 1999. There were no affiliate revenues
in the three months ended March 31, 2000.
(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 ($4.2 million in 2000 and $4.1 million in 1999) and
interest expense on the limited-recourse debt related to the
independent power operations ($3.6 million in 2000 and $2.3 million
in 1999) both of which are included in operating income for the
segments. 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.
(7) Revenues from sales to affiliates were $9.0 million and $8.1
million for the three-months ended March 31, 2000 and 1999,
respectively.
K. On Feb. 29, 2000, Tampa Electric Company, the U.S.
Environmental Protection Agency and the U.S. Department of Justice
announced they had resolved the federal agencies' pending enforcement
actions filed last year against Tampa Electric. The resolution, which
was in the form of a consent decree, resulted in full and final
settlement of the November 1999 federal litigation and Notice of
Violation (NOV) alleging violations of the New Source Review (NSR)
requirements of the Clean Air Act. Since no comments were received
during the public comment period, the Consent Decree is expected to
become effective shortly.
9
<PAGE> 10
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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:
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, Peoples Gas System and the Peoples Gas
Company as well as margins at TECO Coalbed Methane and TECO Coal; business
growth opportunities as they may relate to the company's ability to achieve its
previously announced long-term growth strategy; international risks as they may
relate to TECO Power Services' ability to continue to operate and invest
successfully in its international projects; and changes in and compliance with
environmental regulations that may impose additional costs or curtail some
activities. These factors are discussed more fully under "Investments
Considerations" in registrant's Annual Report on Form 10-K for the year ended
Dec. 31, 1999, and reference is made thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000:
Net income from continuing operations for the quarter ended March 31,
2000 was $53.5 million, or $.42 per share, up from $49.2 million or $.38 per
share for the three-month period ended March 31, 1999. The 9 percent increase
over last year's net income reflects strong revenue growth at Tampa Electric
and Peoples Gas System, better operating conditions and gains from an asset
disposition at TECO Transport, and higher gas prices at TECO Coalbed Methane in
the current quarter. TECO Power Services recorded significantly higher net
income this quarter as its newest power station, the San Jose Power Station in
Guatemala, began commercial operation. These improvements more than offset the
net income decline at TECO Coal, reflecting the expiration of the long-term
Tampa Electric contract at the end of 1999. Consolidated operating income from
continuing operations was $108.1 million compared with last year's operating
income of $96.1 million.
TAMPA ELECTRIC COMPANY - ELECTRIC DIVISION (TAMPA ELECTRIC)
Tampa Electric's net income for the quarter increased approximately 5
percent, reflecting 8 percent higher retail energy volumes, which were partially
offset by higher expenses. Energy sales volumes were higher due to customer
growth of 2.8 percent and the favorable impact of slightly cooler weather,
offset by slightly lower pricing. Expenses were higher due to the anticipated
expiration of U.S. Department of Energy funding related to the Polk Power
Station and the scheduling of outages. A summary of the operating statistics for
the three-months ended March 31, 2000 and 1999 is below:
<TABLE>
<CAPTION>
OPERATING REVENUES KILOWATT-HOUR SALES
-------------------------------- --------------------------------
(in millions) 2000 1999 CHANGE 2000 1999 CHANGE
------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Residential $131.8 $120.3 9.5% 1,592.3 1,474.1 8.0%
Commercial 82.7 77.9 6.1% 1,225.4 1,189.6 3.0%
Industrial - Phosphate 14.2 11.1 28.4% 334.8 292.4 14.5%
Industrial - Other 14.4 13.3 8.7% 258.9 245.9 5.3%
Other sales of electricity 21.4 20.1 6.4% 302.3 292.4 3.4%
Deferred and other revenues (2.0) (4.6) -56.5% -- -- --
------ ------ ------- -------
262.5 238.1 10.2% 3,713.7 3,494.4 6.3%
Sales for resale 22.1 15.8 40.0% 514.8 349.9 47.1%
Other operating revenue 8.0 7.0 14.8% -- -- --
------ ------ ------- -------
$292.6 $260.9 12.2% 4,228.5 3,844.3 10.0%
====== ====== ======= =======
Average customers 556.3 540.9 2.8%
====== ======
</TABLE>
10
<PAGE> 11
FORM 10-Q
TAMPA ELECTRIC COMPANY - NATURAL GAS DIVISION (PEOPLES GAS SYSTEM)
Net income at Peoples Gas System (PGS) increased more than 16 percent
to $8.5 million for the quarter ended March 31, 2000, compared with $7.3 million
for the same period last year. The increase was driven by customer growth of 3.5
percent along with the favorable impact of slightly cooler weather. Natural gas
volumes were higher in the first quarter than for the same period last year,
with residential volumes up more than 19 percent and commercial volumes up more
than 13 percent. Operating expenses and depreciation were higher, primarily
reflecting growth, including PGS' Southwest Florida expansion. A summary of the
operating statistics for the three-months ended March 31, 2000 and 1999 is
below:
<TABLE>
<CAPTION>
(in millions) OPERATING REVENUES THERMS
------------------------------- ------------------------------
2000 1999 CHANGE 2000 1999 CHANGE
------ ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
BY CUSTOMER SEGMENT:
Residential $25.4 $19.1 33.3% 23.9 20.0 19.4%
Commercial 38.4 36.8 4.1% 84.4 74.4 13.3%
Industrial 12.7 4.4 185.2% 110.3 79.3 39.1%
Power generation 2.5 2.5 1.0% 102.4 86.4 18.6%
Other revenues 7.6 8.3 -7.8% -- -- --
----- ----- ----- -----
$86.6 $71.1 21.8% 321.0 260.1 23.4%
===== ===== ===== =====
BY SALES TYPE:
System supply $66.1 $54.8 20.5% 103.9 86.2 20.5%
Transportation 12.9 8.0 61.4% 217.1 173.9 24.8%
Other revenues 7.6 8.3 -7.8% -- -- --
----- ----- ----- -----
$86.6 $71.1 21.8% 321.0 260.1 23.4%
===== ===== ===== =====
Average customers 258.6 247.8 4.3%
===== =====
</TABLE>
The franchise agreement between the City of Lakeland and PGS expired on
March 12, 2000 but negotiations are ongoing for a renewed franchise agreement.
Normal operations in Lakeland have continued under the terms of the expired
agreement. Lakeland provided approximately $2 million of PGS' annual operating
revenues in 1999.
DIVERSIFIED COMPANIES - OPERATING RESULTS
TECO POWER SERVICES recorded significantly higher net income of $9.6
million for the three-months ended March 31, 2000 compared to $3.3 million for
the same period last year. Commencement of operation of the 120- megawatt San
Jose Power Station in Guatemala and normal growth from existing operating
projects contributed to the higher earnings for the quarter.
TECO TRANSPORT recorded net income of $7.9 million for the first
quarter of 2000, an increase of $1.6 million over 1999. The increase was
primarily due to increased coal movements to Tampa Electric and favorable
operating conditions on the rivers, which were partially offset by lower
phosphate and grain volumes during the quarter. TECO Transport's net income
included a net benefit of approximately $1 million associated with equipment
disposition.
TECO COAL reported net income of $1.4 million for the quarter ended
March 31, 2000 compared to $3.8 million for the same period in 1999. TECO Coal's
results were lower due primarily to the expiration of the Tampa Electric
contract as anticipated.
TECO Energy's other diversified companies recorded net income of $6.8
million in the first quarter 2000, up slightly from $6.2 million for the same
period last year. The increase was driven by improved results at TECO Coalbed
Methane due to higher gas prices. Peoples Gas Company's net income of $1.3
million was flat with last year's results, as higher revenues due to higher
commodity prices and increased volumes were offset by lower margins due to
increased propane costs and higher delivery expenses.
11
<PAGE> 12
FORM 10-Q
OTHER
Allowance for funds used during construction (AFUDC) was $0.3 million
for the three-months ended March 31, 2000; no AFUDC was recorded for the same
period in 1999. AFUDC is expected to increase over the next several years
reflecting Tampa Electric's generation expansion activities.
Interest charges were $35.7 million for the three-months ended March
31, 2000 compared to $26.1 million for the same period in 1999. Financing costs
increased in the first quarter reflecting higher borrowing levels and higher
interest rates.
The effective income tax rate on net income from continuing operations
for the three-month period ended March 31, 2000 was 27.9 percent compared to
29.9 percent last year. This decrease reflects the tax treatment of foreign
operations which increased substantially in the first quarter of 2000.
DISCONTINUED OPERATIONS
In November 1999, TECO Energy's automated energy management system
subsidiary, TeCom, sold its assets to Invensys Intelligent Building Systems for
$1.0 million in cash. The after-tax loss from discontinued operations for the
three-months ended March 31, 1999 was $0.9 million. (See Note B on page 6.)
In March, 1999, TECO Oil & Gas sold its subordinated note from ARO to a
third party for $500,000 in cash. In a separate transaction, ARO agreed to
assume disputed joint billing payments of approximately $425,000. The net gain
of $0.6 million recorded in 1999's first quarter related to these two
transactions. (See Note C on page 6.)
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
TECO Energy anticipates that internally generated funds will meet most
of its capital requirements for ongoing operations and commitments. However, the
company expects that some part of its capital requirements, as well as any
significant new investments, will be funded with external capital, which may
include debt of various maturities, preferred stock or common stock.
Construction work in progress decreased by $55 million due to placing the San
Jose plant in service and beginning construction activities for the Commonwealth
Chesapeake Power Station facility as discussed below. Notes payable increased
$126 million since Dec. 31, 1999, reflecting the additions of the San Jose plant
and the ECK Generating Project which are described below. In September 1999,
TECO Energy announced a program for the repurchase of up to $150 million of its
outstanding common stock. To date, the company has acquired 7.0 million shares
of its outstanding common stock at a cost of $143.8 million. (See Note G on page
7.)
In November 1999, TM Power Ventures L.L.C. (TMPV), a joint venture
between TECO Power Services and Mosbacher Power Partners L.P., executed an
agreement with NCP of Virginia, L.L.C. to build, own and operate a 312- megawatt
electric generating facility on the Delmarva Peninsula in Virginia. This
generating facility, the Commonwealth Chesapeake Power Station, is scheduled to
be on-line in two phases with 135 megawatts expected to be in service by June
2000 and the remaining capacity expected to be, by June 2001. The estimated $175
million project cost is expected to be financed with non-recourse debt and
equity from the partners. Plans for the financing of the project are proceeding
in line with a June or July 2000 closing, which is contingent upon final receipt
of all operating permits.
In January 2000, TMPV acquired an additional 13.35-percent ownership
interest in the ECK Generating Project, increasing TPS' investment in the Czech
project by $19.5 million. A consultant has been retained to assist TMPV in its
efforts to seek a qualified buyer for TMPV's entire interest in the project.
In February 2000, TPS completed its transactions with Coastal Power
Company and became the 100-percent owner of the San Jose Power Station. (See
Note I on page 8.) Conversion of the construction loan to permanent non-recourse
financing is currently underway and is expected to be accomplished during the
2nd quarter of 2000. At the time of conversion, there will be a general debt
restructuring of the San Jose project debt.
In January 2000, TECO Coal purchased two existing synthetic fuel
production facilities which qualify for Section 29 tax credits through 2007.
Full production is expected to begin in mid-2000.
12
<PAGE> 13
FORM 10-Q
YEAR 2000 COMPUTER SYSTEMS
TECO Energy, Inc. has encountered no significant problems related to
the Year 2000 issue, and all computer systems are performing as expected to
date. The company does not anticipate any significant additional costs related
to this issue.
ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
In 1998, the FASB issued FAS 133, Accounting for Derivative Instruments
and Hedging. This standard is effective for fiscal years beginning after June
15, 2000. The new standard, as amended, requires an entity 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.
In preparation for adoption of this Statement effective Jan. 1, 2001,
the company has completed an analysis of the information required by FAS 133.
From time to time, TECO Energy has entered into futures, swaps and options
contracts to hedge the selling price for its physical production at TECO Coalbed
Methane, to limit exposure to gas price increases at both the regulated natural
gas utility and unregulated propane business, and to limit exposure to fuel
price increases at TECO Transport. TECO Energy has not used derivatives or other
financial products for speculative purposes. At this point, the company does not
anticipate that the adoption of FAS 133 will significantly impact its financial
statements since any activity in derivatives has been relatively minimal and
short-term in duration. Management will continue to evaluate all current and
possible future uses of derivatives, including their effectiveness for hedging
treatment, and to apply procedures and methods for valuing them.
ACCOUNTING FOR REPAIR AND MAINTENANCE COSTS FOR PLANNED MAJOR MAINTENANCE
ACTIVITIES
TECO Energy, Inc. and its subsidiaries charge the cost of repairs and
maintenance to expense as incurred. One exception to this is at TPS' Alborada
Power Station in Guatemala (TCAE). For this facility, revenue deferrals are
recorded to recognize the portion of billings that reflect payments for major
maintenance and overhaul expenses that will take place in the future. This
liability is included on the balance sheet in Other deferred credits. Amounts
deferred are not significant.
13
<PAGE> 14
FORM 10-Q
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
TECO Energy is exposed to changes in interest rates primarily as a
result of its borrowing activities. A hypothetical 10-percent increase in TECO
Energy's weighted average interest rate on its variable rate debt would not have
a significant impact on TECO Energy'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 TECO Energy's long-term debt
at March 31, 2000.
Based on policies and procedures approved by the Board of Directors,
from time to time TECO Energy or its affiliates 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.
TECO Coalbed Methane is exposed to commodity price risk through the
sale of natural gas, and TECO Coal is exposed to commodity price risk through
coal sales.
From time to time, TECO Energy or its affiliates may enter into
futures, swaps and options contracts to hedge the selling price for physical
production at TECO Coalbed Methane, to limit exposure to gas price increases at
both the regulated natural gas utility and unregulated propane business, or to
limit exposure to fuel price increases at TECO Transport.
As TECO Power Services develops the Commonwealth Chesapeake Power
Station, and other similar projects, the company may utilize futures, swaps and
option contracts in connection with the marketing of power in order to reduce
the variability of electricity selling prices.
TECO Energy and its affiliates do not use derivatives or other
financial products for speculative purposes.
14
<PAGE> 15
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 19, 2000, the
shareholders of TECO Energy, Inc., elected five directors and approved
management's proposal relating to the Corporation's performance-based
compensation program. The votes were as follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast Broker
For Against Abstentions Non-Votes
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Election of Directors
S.L. Baldwin 99,048,028 2,042,865
H.L. Culbreath 98,978,904 2,111,990
R.D. Fagan 99,425,730 1,665,164
L. Guinot, Jr. 99,415,750 1,675,144
W.P. Sovey 99,373,696 1,717,198
Performance-Based Compensation
Program Proposal 93,564,760 5,535,062 1,991,064 7
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12 Ratio of earnings to fixed charges
27 Financial data schedule - three months ended March 31, 2000
(EDGAR filing only)
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated Feb. 16,
2000, reporting under "Item 5. Other Events" announcing TECO
Energy, Inc.'s agreement to form a joint venture to combine its
Peoples Gas Company propane operations with that of three other
companies.
The registrant filed a Current Report on Form 8-K dated Feb. 29,
2000, reporting under "Item 5. Other Events" announcing Tampa
Electric Company's agreement with the U.S. Environmental
Protection Agency and the U.S. Department of Justice to resolve
the federal agencies' pending enforcement actions against Tampa
Electric Company.
15
<PAGE> 16
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 12, 2000 *By: /s/ G. L. GILLETTE
----------------------------
G. L. GILLETTE
Vice President - Finance
And Chief Financial Officer
(Principal Financial Officer)
16
<PAGE> 17
FORM 10-Q
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
12 Ratio of earnings to fixed charges 18
27 Financial data schedule - three months ended
March 31, 2000. (EDGAR filing only) --
17
<PAGE> 1
EXHIBIT 12
TECO ENERGY, INC.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the company's ratio of earnings to fixed
charges for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ENDED -------------------------------------------------------------------
MARCH 31, 2000 MARCH 31, 2000 1999 1998 1997 1996 1995
-------------- -------------- --------- -------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
2.95x 3.11 x (1) 3.25x(2) 3.67x(3) 3.77x(4) 3.72x 3.50x
</TABLE>
For the purposes of calculating these ratios, earnings consist of
income from continuing operations before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt premium, the
interest component of rentals and preferred stock dividend requirements.
- -----------------
(1) Includes the effect of non-recurring pretax charges totaling $21.0
million recorded in the third and fourth quarters of 1999. Charges
consisted of the following: $10.5 million recorded at Tampa Electric
based on FPSC audits of its 1997 and 1998 earnings which limited its
equity ratio to 58.7 percent; $3.5 million at Tampa Electric to resolve
litigation filed by the U.S. Environmental Protection Agency; $6.0
million at TECO Investments to adjust the carrying value of certain
leveraged leases; and $4.3 million at Tampa Electric and $3.3 million
net benefit at TECO Energy for corporate income tax settlements related
to prior years' tax returns. The effect of these charges was to reduce
the ratio of earnings to fixed charges. Had these charges been excluded
from the calculation, the ratio of earning to fixed charges would have
been 3.42x for the twelve-months ended March 31, 2000.
(2) Includes the effect of non-recurring pretax charges totaling $21.0
million recorded at Tampa Electric, TECO Investments and TECO Energy
described in (1) above. The effect of these charges was to reduce the
ratio of earnings to fixed charges. Had these charges been excluded
from the calculation, the ratio of earnings to fixed charges would have
been 3.60x for the year ended Dec. 31, 1999.
(3) Includes the effect of non-recurring pretax charges totaling $30.5
million associated with write-offs at TECO Coal and Tampa Electric, and
$.6 million pretax of merger-related costs. The effect of these charges
was to reduce the ratio of earnings to fixed charges. Had these charges
been excluded from the calculation, the ratio of earnings to fixed
charges would have been 3.95x for the year ended Dec. 31, 1998.
(4) Includes a $2.6-million pretax charge for all costs associated with the
mergers completed in June 1997. The effect of this charge was to reduce
the ratio of earnings to fixed charges. Had this charge been excluded
from the calculation, the ratio of earnings to fixed charges would have
been 3.79x for the year ended Dec. 31, 1997.
18
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS 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> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,203
<OTHER-PROPERTY-AND-INVEST> 508
<TOTAL-CURRENT-ASSETS> 486
<TOTAL-DEFERRED-CHARGES> 330
<OTHER-ASSETS> 244
<TOTAL-ASSETS> 4,771
<COMMON> 125
<CAPITAL-SURPLUS-PAID-IN> 235
<RETAINED-EARNINGS> 1,099
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,459
0
0
<LONG-TERM-DEBT-NET> 1,185
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 940
<LONG-TERM-DEBT-CURRENT-PORT> 121
0
<CAPITAL-LEASE-OBLIGATIONS> 31
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,035
<TOT-CAPITALIZATION-AND-LIAB> 4,771
<GROSS-OPERATING-REVENUE> 524<F1>
<INCOME-TAX-EXPENSE> 21
<OTHER-OPERATING-EXPENSES> 416
<TOTAL-OPERATING-EXPENSES> 416
<OPERATING-INCOME-LOSS> 108<F2>
<OTHER-INCOME-NET> 2
<INCOME-BEFORE-INTEREST-EXPEN> 110
<TOTAL-INTEREST-EXPENSE> 36
<NET-INCOME> 53
0
<EARNINGS-AVAILABLE-FOR-COMM> 53
<COMMON-STOCK-DIVIDENDS> 41
<TOTAL-INTEREST-ON-BONDS> 12
<CASH-FLOW-OPERATIONS> 107
<EPS-BASIC> 0.42
<EPS-DILUTED> 0.42
<FN>
<F1>Discontinued operations had no revenues for the period.
<F2>From continuing operations.
</FN>
</TABLE>
