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 February 29, 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 1-3789
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
New Mexico 75-0575400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Tyler at Sixth, Amarillo, Texas 79101
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code (806) 378-2121
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 __
As of April 10, 1996, 40,917,908 shares of the Company's common stock
were outstanding.
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
FORM 10-Q
For the Quarter Ended February 29, 1996
TABLE OF CONTENTS
PART I. Financial Information
(Unaudited, except Condensed Consolidated Balance Sheet at
August 31, 1995)
Condensed Consolidated Balance Sheets at February 29, 1996
and August 31, 1995
Condensed Consolidated Statements of Earnings for the three, six and
twelve months ended February 29, 1996 and February 28, 1995
Condensed Consolidated Statements of Cash Flows for the six and twelve
months ended February 29, 1996 and February 28, 1995
Notes to Condensed Consolidated Financial Statements
Independent Accountants' Report
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. Other Information
Signatures
Exhibit 12. Statement of Computation of Ratio of Earnings
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Balance Sheets
Assets
<S> <C> <C>
February 29, August 31,
1996 1995
(Unaudited)
(In Thousands)
Utility plant:
Utility plant in service $ 2,430,157 $ 2,366,435
Accumulated depreciation (887,467) (854,015)
Net plant in service 1,542,690 1,512,420
Construction work in progress 62,270 31,026
Net utility plant 1,604,960 1,543,446
Nonutility property and investments 73,038 70,087
Current assets:
Cash and temporary investments 15,895 36,860
Accounts receivable, net 59,001 73,262
Accrual for unbilled revenues 17,159 28,626
Materials and supplies, at average cost 20,793 21,647
Prepayments and other current assets 8,067 10,734
Total current assets 120,915 171,129
Deferred debits 136,825 124,343
Total assets $ 1,935,738 $ 1,909,005
Continued . . .
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Balance Sheets
Capitalization and Liabilities
<S> <C> <C>
February 29, August 31,
1996 1995
(Unaudited)
(In Thousands)
Capitalization:
Common stock, $1 par value, authorized - 100,000,000 shares;
issued and outstanding - 40,917,908 shares $ 40,918 $ 40,918
Premium on capital stock 307,484 306,376
Retained earnings 367,203 373,458
Total common shareholders' equity 715,605 720,752
Preferred stock - redemption not required - 72,680
Long-term debt 565,760 582,276
Total capitalization 1,281,365 1,375,708
Current liabilities:
Short-term debt 138,834 -
Current maturities of long-term debt 15,182 276
Accounts payable 9,243 12,187
Liability for refunds to customers 677 5,969
Interest accrued 8,967 9,067
Fuel and purchased power expense accrued 31,617 40,164
Taxes accrued 7,707 39,757
Dividends payable on common stock 22,505 22,505
Other current liabilities 40,130 39,843
Total current liabilities 274,862 169,768
Deferred credits:
Deferred income taxes 361,894 344,794
Unamortized investment tax credits 5,928 6,053
Other 11,689 12,682
Total deferred credits 379,511 363,529
Total capitalization and liabilities $1,935,738 $1,909,005
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Statements of Earnings
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended Twelve Months Ended
2-29-96 2-28-95 2-29-96 2-28-95 2-29-96 2-28-95
(In Thousands, Except Per Share Amounts)
Operating revenues $203,785 $181,848 $404,742 $369,065 $869,760 $820,050
Operating expenses:
Operation:
Fuel 94,658 83,622 184,108 167,648 386,511 381,415
Purchased power 3,188 1,232 4,626 2,331 7,536 4,500
Other 29,636 25,679 58,193 51,411 114,248 108,051
Maintenance 7,809 8,056 15,043 15,946 28,137 30,617
Depreciation and amortization 16,459 15,287 32,847 30,579 63,337 59,897
Taxes other than property and
income taxes 5,131 4,857 10,408 9,667 19,864 19,364
Property taxes 5,919 6,017 11,597 11,861 23,745 23,392
Income taxes (note 2) 12,184 9,313 25,881 21,749 68,005 55,448
Total operating expenses 174,984 154,063 342,703 311,192 711,383 682,684
Operating income 28,801 27,785 62,039 57,873 158,377 137,366
Other income, net:
Income taxes (note 2) (708) (731) (1,293) (1,217) (3,850) (496)
Other, net 2,075 1,972 3,578 3,507 11,045 2,491
Total other income, net 1,367 1,241 2,285 2,290 7,195 1,995
Interest charges 12,087 10,349 23,075 20,317 44,692 40,764
Net earnings 18,081 18,677 41,249 39,846 120,880 98,597
Dividends and premiums on
cumulative preferred stock 1,275 1,220 2,494 2,439 4,933 4,878
Earnings applicable to
common stock $ 16,806 $ 17,457 $ 38,755 $ 37,407 $115,947 $ 93,719
Earnings per common share* $ 0.41 $ 0.43 $ 0.95 $ 0.91 $ 2.83 $ 2.29
Weighted average shares
outstanding 40,918 40,918 40,918 40,918 40,918 40,918
Dividends declared per
common share $ 0.55 $ 0.55 $ 1.10 $ 1.10 $ 2.20 $ 2.20
( ) Denotes deduction.
*Based on weighted average shares outstanding.
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHWESTERN PUBLIC SERVICE COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<S> <C> <C> <C> <C>
Six Months Ended Twelve Months Ended
2-29-96 2-28-95 2-29-96 2-28-95
(In Thousands)
Operating Activities:
Cash received from customers $ 424,689 $ 400,557 $ 848,235 $ 831,068
Cash paid to suppliers and employees (270,355) (258,663) (522,011) (530,698)
Interest paid (23,510) (20,207) (45,393) (40,236)
Income taxes paid (42,344) (32,882) (59,550) (45,803)
Taxes other than income taxes paid (30,902) (31,145) (41,655) (41,777)
Other operating cash receipts and payments, net (139) 2,938 6,742 15,497
Net cash provided by operating activities 57,439 60,598 186,368 188,051
Investing Activities:
Construction expenditures (64,401) (44,567) (114,496) (89,479)
Nonutility property and investments (2,951) (11,640) (19,530) (17,219)
Acquisitions (29,200) - (29,200) -
Net cash used in investing activities (96,552) (56,207) (163,226) (106,698)
Financing Activities:
Issuance of long-term debt - 70,000 6,204 70,000
Retirement of long-term debt (1,610) (16,469) (2,021) (16,433)
Change in short-term debt 138,834 (14,994) 138,834 (44,500)
Redemption of preferred stock (71,572) - (71,572) -
Dividends paid (common and preferred) (47,504) (47,449) (94,953) (94,898)
Net cash provided by (used in) financing activities 18,148 (8,912) (23,508) (85,831)
Net Decrease in Cash and Temporary Investments (20,965) (4,521) (366) (4,478)
Cash and Temporary Investments at Beginning of Period 36,860 20,782 16,261 20,739
Cash and Temporary Investments at End of Period $ 15,895 $ 16,261 $ 15,895 $ 16,261
Reconciliation of Net Earnings to Net Cash Provided
by Operating Activities:
Net earnings $ 41,249 $ 39,846 $ 120,880 $ 98,597
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 32,847 30,579 63,337 59,897
Deferred income taxes and investment tax credits 7,983 5,445 12,005 13,607
Allowance for equity funds used during construction (60) (43) (245) (31)
Cash flows impacted by changes in:
Accounts receivable 14,261 13,604 (3,248) 2,322
Accrual for unbilled revenues 11,467 18,820 (14,661) 7,401
Materials and supplies 854 (2,431) (124) (2,068)
Accounts payable (2,944) (3,980) 1,025 (3,159)
Fuel and purchased power expense accrued (8,547) (14,605) 5,338 (3,611)
Taxes accrued (32,050) (24,990) 2,339 1,531
Liability for refunds to customers (5,292) (442) (2,686) 2,272
Other, net (2,329) (1,205) 2,408 11,293
Net cash provided by operating activities $ 57,439 $ 60,598 $ 186,368 $ 188,051
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Interim periods. The results of operations for the interim periods are not
necessarily an indication of the expected results for the fiscal year due to the
seasonal nature of Southwestern Public Service Company's (the Company) business.
The unaudited condensed consolidated financial statements included herein were
prepared from the books of the Company in accordance with generally accepted
accounting principles and reflect all adjustments (none of which are other than
normal recurring adjustments) which are, in the opinion of management, necessary
to provide a fair statement of the results of operations and financial position
for the interim periods. Such financial statements generally conform to the
presentation reflected in the Company's Annual Report to Shareholders. The
current interim periods reported herein are included in the fiscal year subject
to independent audit at the end of the year.
(2) Income taxes. The components of income tax expense (benefit)are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended Twelve Months Ended
2-29-96 2-28-95 2-29-96 2-28-95 2-29-96 2-28-95
(In Thousands)
Taxes on operating income:
Federal-current $ 6,416 $ 5,831 $16,466 $15,490 $52,569 $39,800
Federal-deferred 5,012 3,207 8,299 5,697 13,273 14,142
Investment tax credits (63) (63) (125) (125) (250) (250)
State-current 819 338 1,241 687 2,413 1,756
12,184 9,313 25,881 21,749 68,005 55,448
Taxes on other income:
Federal-current 737 837 1,467 1,332 4,838 769
Federal-deferred (40) (118) (191) (127) (1,018) (285)
State-current 11 12 17 12 30 12
708 731 1,293 1,217 3,850 496
Total income taxes $12,892 $10,044 $27,174 $22,966 $71,855 $55,944
</TABLE>
(3) Merger with Public Service Company of Colorado (PSCo). The Company and
Denver-based PSCo entered into a definitive merger agreement (the Merger) on
August 22, 1995, to form a registered public utility holding company named New
Century Energies, Inc., which will be the parent company for the Company and
PSCo. The shareholders of the Company and PSCo approved the Agreement and Plan
of Reorganization, as amended, at their respective shareholder meetings on
January 31, 1996. The transaction is still subject to various conditions,
including the approval of, or the taking of other action by, the Securities and
Exchange Commission, the Federal Trade Commission, the Department of Justice,
the Federal Energy Regulatory Commission, and the state public utility
commissions in Texas, Colorado, New Mexico and Wyoming. Requested approvals have
been received from Kansas and the Nuclear Regulatory Commission.
Requisite applications have been filed with the applicable state
jurisdictions, the Securities and Exchange Commission and the Federal Energy
Regulatory Commission and numerous intervenors have filed in certain of the
proceedings. Hearings have been scheduled in Texas for June 17, 1996, in
Colorado for July 1, 1996, and in New Mexico for July 22, 1996.
The Merger, with a targeted completion date in the fall of 1996, is
conditioned on qualifying as a tax-free reorganization and being accounted for
as a pooling of interests.
(4) Long-Term Debt. The Company made a public offering of $60 million of 6.50%
First Mortgage Bonds (Bonds) on March 8, 1996. The proceeds from the Bonds were
applied primarily to the retirement of short-term debt.
(5) Rate and Regulatory Matters. A Public Utility Commission of Texas (PUCT)
substantive rule requires periodic examination of the Company's fuel and
purchased power costs, the efficiency of the use of such fuel and purchased
power, fuel acquisition and management policies and purchase power commitments.
On May 1, 1995, the Company filed with the PUCT a petition for a fuel
reconciliation for the months of January 1992 through December 1994. A hearing
was held in September 1995, and in January 1996 an order was issued which
required the Company to make a $3.9 million fuel refund consisting of $2.1
million of overrecovered fuel costs (which has previously been accrued) and $1.8
million of disallowed fuel costs for the period. Additionally, the order
required the Company to flow through to customers 100% of margins from non-firm
off-system opportunity sales as of January 1995. Prior Commission rulings had
allowed the Company to retain 25% of these margins. The retained portion of
these margins for calendar year 1995 was $2.3 million. The Company filed a
motion for rehearing on January 25, 1996. The PUCT issued an order on March 14
denying rehearing on the fuel disallowance, (which was adjusted to $1.9
million), and ordered the 100% margin flow through effective with the first
billing cycle after the date of the order. The Company filed a motion for
rehearing of the March 14 order on April 3. The ultimate outcome of this matter
will not significantly affect consolidated financial results.
In December 1989 the FERC issued its order regarding the 1985 rate
case. The Company appealed certain portions of the order that related to
recognition in rates of the reduction of the federal income tax rate from 46% to
34%. The United States Court of Appeals for the District of Columbia Circuit
remanded the case, directing the FERC to reconsider the Company's claim of an
offsetting cost and limiting the FERC's actions. The FERC issued its Order on
Remand in July 1992, required filings were made and a hearing was completed in
February 1994. In October 1994, the administrative law judge issued a favorable
initial decision that, if approved by the FERC, would result in a substantial
recovery by the Company. Negotiated settlements with the Company's partial
requirements customers and Texas-New Mexico Power Company were approved by the
FERC in July 1993 and September 1993, respectively, and the Company received
approximately $2.8 million. In a settlement with the Company's New Mexico
cooperative customers, which the FERC approved in July 1995, the Company
received approximately $7.0 million, including interest. Resolutions with the
remaining wholesale customers, Golden Spread member cooperatives and Lyntegar
Electric Cooperative have not been reached. The Company cannot reasonably
estimate the ultimate amount recoverable from these proceedings; however, if a
favorable resolution is reached in 1996, it could materially improve
consolidated earnings for the year.
In August 1995 the Company agreed to purchase TUCO, Inc. (TUCO), a
wholly owned subsidiary of Cabot Corporation, for $77 million subject to
regulatory approval and other conditions. TUCO owns the coal inventory
maintained at the Company's Harrington and Tolk generating stations. It also
administers contracts with coal mines, railroads and the coal-handling operator
at the two coal-fueled power plants. This purchase would be expected to lower
fuel costs. On February 7, 1996, the PUCT denied certain rule waivers for rate
treatment which are necessary to complete the purchase; however, the Company has
applied for rehearing and the matter is pending.
(6) General. See note (1) of Notes to Consolidated Financial Statements in the
Company's 1995 Annual Report on Form 10-K for a summary of the Company's
significant accounting policies.
<PAGE>
Independent Accountants' Report
Southwestern Public Service Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Southwestern Public Service Company and subsidiaries as of February 29, 1996,
and the related condensed consolidated statements of earnings for the
three-month, six-month and twelve-month periods ended February 29, 1996, and
February 28, 1995, and cash flows for the six-month and twelve-month periods
ended February 29, 1996, and February 28, 1995. These financial statements are
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 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 such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet and statement of capitalization of
Southwestern Public Service Company and subsidiaries as of August 31, 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
October 10, 1995, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of August 31, 1995, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
April 12, 1996
Dallas, Texas
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating Revenues and Kilowatt-Hour Sales
Substantially all of the Company's operating revenues result from the
sale of electric energy. The principal factors determining revenues are the
amount and price per unit of energy sold. The following table describes the
principal components of changes in revenues.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Increase (Decrease) From Corresponding Prior Period
Three Months Six Months Twelve Months
Ended Ended Ended
2-29-96 2-29-96 2-29-96
(Dollars In Thousands)
Estimated effect on revenues of variations in:
Kilowatt-hour (kwh) sales* $ 13,399 $20,847 $41,525
Rates 433 2,201 9,952
Fuel and purchased power cost recovery 5,673 11,716 1,990
Subtotal 19,505 34,764 53,467
Non-firm kwh sales 2,432 913 (3,757)
Total revenue increase $21,937 $35,677 $49,710
Increase in kwh sales* (in millions) 342 524 1,008
Decrease in non-firm kwh sales (in millions) (1) (205) (429)
*Comprised of retail and wholesale excluding economy and interruptible (non-firm) wholesale kwh sales.
</TABLE>
Variations in Kwh Sales. The revenue increases in the three-, six- and
twelve-month periods are attributable primarily to increased sales to rural
electric cooperatives (RECs). This increase is principally due to sales to Cap
Rock Electric Cooperative that began in February 1994 and increased to 100% of
Cap Rock's West Texas requirements in February 1995. Increased irrigation sales,
reflecting below normal precipitation, also contributed to the rise in REC sales
for all periods. Improved economic conditions also positively impacted sales for
all periods. Accounting adjustments to the estimate of delivered not billed kwh
sales also increased revenues for the twelve-month period by approximately $8.3
million. These estimated kwh sales relate to energy used by customers but not
billed until the subsequent month.
Variations in Rates. Increased revenues for the twelve-month period are
primarily the result of greater demand charge revenues paid by certain wholesale
customers. Additionally, a settlement of the 1985 Federal Energy Regulatory
Commission (FERC) rate case with the Company's New Mexico wholesale REC
customers contributed increased revenues of approximately $4.0 million (and
interest of $3.0 million which is included in other income). Revenues increased
in the six-month period due primarily to greater demand charge revenues from
certain wholesale and industrial customers.
Variations in Fuel and Purchased Power Cost Recovery. Revenue increases
for the three- and six-month periods are due to increased coal costs and natural
gas prices. During the twelve-month period increased coal costs caused the rise
in revenues.
Variations in Non-Firm Kwh Sales. The amount of revenues arising from
non-firm sales is dependent, in large part, upon the amount and cost of power
available to the Company for sale, the demand for power, the availability of
competing hydroelectric power from the Northwest and generation from major
plants in the West. The decline in non-firm sales for the twelve-month period
was primarily due to available power from major western plants and excess
hydroelectric power in the Northwest. Although non-firm kwh sales were down in
the three- and six-month periods, revenues increased because of greater demand
charges paid by Public Service Company of New Mexico (PNM) due to a contractual
increase of 100 megawatts of interruptible power in May 1995. However, PNM did
not purchase a substantial amount of interruptible energy under this agreement
during these periods.
Operating Expenses and Non-Operating Items
Fuel and purchased power expense comprised 55.9%, 55.1% and 55.4% of
total operating expenses for the three, six and twelve months ended February 29,
1996, respectively. When compared to the corresponding periods last year, these
expenses increased $13.0 million or 15.3%, $18.8 million or 11.0%, and $8.1
million or 2.1%, respectively. Fuel expense (excluding purchased power expense),
per net kwh generated, increased from 1.77 to 1.94 cents, from 1.72 to 1.89
cents, and from 1.79 to 1.82 cents for the respective three-, six- and
twelve-month periods because of increased coal costs for all periods and
increased natural gas prices for the three- and six-month periods.
Total operating expenses, excluding fuel and purchased power, increased
$7.9 million or 11.5%, $12.8 million or 9.0%, and $20.6 million or 6.9%, for the
respective three-, six- and twelve-month periods. These increases resulted
primarily from an expected increase in merger-related expenses (see OTHER
MATTERS) and from increased income taxes. Income tax expenses are higher than
for the comparable periods because of higher income and because higher merger
expenses incurred in the most recent periods are not deductible in determining
taxable income.
Other income increased in the twelve-month period due primarily to
approximately $3.0 million of interest from the rate case settlement with New
Mexico wholesale customers. The write-off of nonrecurring expenses of $3.4
million (related to engineering and design costs of a previously planned
generating facility and business development costs related to a generation
project in Missouri) reduced other income for last year.
Earnings
Current operating income increased for all periods due primarily to
increased kwh sales to all retail customers and wholesale customers,
particularly RECs. The increase in sales to RECs was due primarily to sales to
Cap Rock. Increased irrigation-related sales, due to below-normal precipitation,
also contributed to the rise in REC sales for all periods. Earnings applicable
to common stock increased for the six- and twelve-month periods because of
greater kilowatt-hour sales. The increase for the twelve-month period also
reflects a change in the estimate of delivered not billed kwh sales ($5.4
million or 13 cents per share) and the New Mexico rate case settlement ($4.5
million or 11 cents per share). The decline in earnings for the three-month
period was due primarily to increased interest and merger-related expenses (see
OTHER MATTERS).
Assuming normal weather conditions, earnings for the 1996 fiscal year
are expected to remain relatively level. If a favorable resolution of the 1985
FERC rate case with Texas wholesale REC customers could be reached in 1996, it
could materially improve earnings for the year. Additionally, Quixx has entered
into an agreement to sell certain water rights to the Canadian River Municipal
Water Authority (CRMWA) for $14.5 million that would result in an after-tax gain
of approximately $7.6 million. The sale is conditioned on CRMWA receiving
assurances from certain member cities that the cost of the water rights will be
repaid. The Company expects the sale to close in fiscal 1996; however,
management can give no assurance as to when or whether this sale will be
completed.
LIQUIDITY AND CAPITAL RESOURCES
The Company's demand for capital is normally related to the
construction of utility plant and equipment. Cash construction expenditures
excluding AFUDC for the three, six and twelve months ended February 29, 1996,
were $31.4 million, $64.4 million and $114.5 million, respectively. Such
expenditures are expected to approximate $112.9 million for 1996. The purchase
of certain Texas properties from Texas-New Mexico Power Company (TNP) for $29.2
million resulted in additional cash requirements this year. If the PUCT order
denying the Company's rate treatment of the purchase of TUCO Inc. (TUCO) from
Cabot Corporation for $77 million were to be reversed, that purchase would also
result in additional cash requirements (See Note 5). The Company cannot
accurately forecast the portion of internally generated funds to be used for
capital expenditures, but expects that it will be approximately 60 percent in
fiscal 1996 (including funds used for the purchase of TNP, but excluding funds
used to retire the Preferred Stock discussed below, and any funds required in
connection with the purchase of TUCO).
The Company redeemed on December 27, 1995, all of its outstanding
Preferred Stock that was redeemable by its terms. The Company also purchased on
January 9, 1996, all of the outstanding 2,600 shares of its 14.50% Cumulative
Preferred Stock that was not redeemable by its terms. The aggregate cost to
retire the Preferred Stock was approximately $76 million, including accrued
dividends.
The Company financed the retirement of the Preferred Stock with short-term
borrowings.
On March 8, 1996, the Company issued $60 million of 6.50% First
Mortgage Bonds due March 1, 2006, the net proceeds of which were used to repay a
portion of the Company's outstanding short-term borrowings. The Company has
effective a shelf registration under which $70 million of First Mortgage Bonds
remain available for issuance. At February 29, 1996, the Company maintained
committed bank lines of credit aggregating $178 million, under which there were
no borrowings outstanding. At February 29, 1996, the Company had approximately
$130 million of commercial paper outstanding.
The holders of the Company's common stock at the Annual meeting
approved the amendment of the Company's Articles to eliminate the class of
Preferred Stock then authorized and to provide for a new class of 10 million
shares of Preferred Stock, $1 par value, which may be issued in series with such
terms and conditions as may be set by the Board of Directors. The Company
currently contemplates the sale of Preferred Stock, Common Stock and Bonds
during the five-year period 1996-2000 in connection with the financing of its
construction program and retirement of outstanding securities.
OTHER MATTERS
In response to changing utility regulations, federal and state
statutory changes, and evolving markets, the Company has entered into a
definitive merger agreement with Public Service Company of Colorado (the Merger)
(see Note 3). Consummation of the Merger is subject to customary conditions
including receiving shareholder and regulatory authority approvals. The
Company's shareholders approved the Merger at the Annual Meeting on January 31,
1996. The two utilities are working toward a completion date in the fall of
1996. The foregoing discussions of the Company's "Results of Operations" and
"Liquidity and Capital Resources" do not take into account any changes that
could arise as a result of the Merger.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Other Information.
The Company's Annual Meeting of Shareholders was held January 31, 1996.
The following persons were reelected to the Company's Board of Directors to hold
office until the Annual Meeting of Shareholders in 1999.
Director In Favor Withheld
Danny H. Conklin 34,589,281 632,089
Bill D. Helton 34,576,181 645,189
R. R. Hemminghaus 34,543,972 677,398
Don Maddox 34,555,454 665,917
The Company's shareholders also approved an amendment to the Restated
Articles of Incorporation to provide for a new class of 10 million shares of
preferred stock, $1 par value, and approved the Agreement and Plan of
Reorganization, as amended, with Public Service Company of Colorado.
Item 5. Other Information.
The Company's ratio of earnings to fixed charges for the twelve months
ended February 29, 1996, was 4.94. The ratio of earnings to fixed charges and
preferred dividend requirements combined was 4.26 for such period.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
12 Statement showing computations of ratio of earnings for the
twelve months ended February 29, 1996
15 Letter of Deloitte & Touche LLP regarding unaudited
condensed consolidated interim financial information
(b) Reports on Form 8-K:
Items reported - Item 5. Other Events
Financial Statements filed - None
Dates of reports filed - January 31, 1996, reporting shareholder
approval of the Merger Agreement
- February 1, 1996, filing Restated
Articles of Incorporation
<PAGE>
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.
SOUTHWESTERN PUBLIC SERVICE COMPANY
By Doyle R. Bunch II
Executive Vice-President
Accounting and Corporate Development
DATE: April 12, 1996
<TABLE>
<CAPTION>
SOUTHWESTERN PUBLIC SERVICE COMPANY
EXHIBIT 12. Statement of Computation of Ratio of Earnings
Twelve Months Ended
February 29, 1996
(Dollars In Thousands)
<S> <C>
Computation of Ratio of Earnings to Fixed Charges:
Fixed charges, as defined:
Interest on long-term debt $ 43,083
Amortization of debt premium, discount and expense 545
Other interest 3,947
Estimated interest factor of rental charges 1,292
Total fixed charges $ 48,867
Earnings as defined:
Net earnings per statement of earnings $ 120,880
Fixed charges as shown 48,867
Income taxes:
Federal-current 57,407
Federal-deferred 12,255
State 2,443
Investment tax credits (250)
Earnings available for fixed charges $ 241,602
Ratio of earnings to fixed charges 4.94
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividend Requirements Combined:
Total fixed charges, as shown above $ 48,867
Preferred dividend requirements* 7,814
Total fixed charges and preferred dividend requirements combined $ 56,681
Earnings available for fixed charges and preferred dividend
requirements combined $ 241,602
Ratio of earnings to fixed charges and preferred dividend
requirements combined 4.26
*Preferred dividend requirements:
Annual preferred dividend requirement $ 4,933
Less amount deductible for income tax purposes 82
Net requirement [A] $ 4,851
1 / (100% - effective tax rate) [B] 1.594
Effective tax rate 37.3%
[A] x [B] $ 7,732
Add amount deductible for income tax purposes 82
Preferred dividend requirements $ 7,814
</TABLE>
EXHIBIT 15.
Southwestern Public Service Company:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Southwestern Public Service
Company and subsidiaries for the periods ended February 29, 1996, and February
28, 1995, as indicated in our report dated April 12, 1996; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, is
incorporated by reference in Amendment No. 1 to Registration Statement No.
33-53171 on Form S-3, Registration Statement No. 33-27452 on Form S-8, and
Registration Statement No 33-64951 on Form S-4.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
April 12, 1996
Dallas, Texas
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<MULTIPLIER> 1000
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-29-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,604,960
<OTHER-PROPERTY-AND-INVEST> 73,038
<TOTAL-CURRENT-ASSETS> 120,915
<TOTAL-DEFERRED-CHARGES> 136,825
<OTHER-ASSETS> 0
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<COMMON> 40,918
<CAPITAL-SURPLUS-PAID-IN> 307,484
<RETAINED-EARNINGS> 367,203
<TOTAL-COMMON-STOCKHOLDERS-EQ> 715,605
0
0
<LONG-TERM-DEBT-NET> 565,760
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 138,834
<LONG-TERM-DEBT-CURRENT-PORT> 15,182
0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 500,357
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<GROSS-OPERATING-REVENUE> 404,742
<INCOME-TAX-EXPENSE> 25,881
<OTHER-OPERATING-EXPENSES> 316,822
<TOTAL-OPERATING-EXPENSES> 342,703
<OPERATING-INCOME-LOSS> 62,039
<OTHER-INCOME-NET> 2,285
<INCOME-BEFORE-INTEREST-EXPEN> 165,572
<TOTAL-INTEREST-EXPENSE> 23,075
<NET-INCOME> 41,249
2,494
<EARNINGS-AVAILABLE-FOR-COMM> 38,755
<COMMON-STOCK-DIVIDENDS> 45,010
<TOTAL-INTEREST-ON-BONDS> 21,552
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