FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1994
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 1-5007
TAMPA ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
FLORIDA 59-0475140
(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, 1994):
Common Stock, Without Par Value 10<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of management, the unaudited financial
statements include all adjustments (none of which, except
for the adjustment discussed in Note D on page 7, were other
than normal and recurring) necessary to present fairly the
results for the three-month periods ended March 31, 1994 and
1993. Reference should be made to the explanatory notes
affecting the income and balance sheet accounts contained in
Tampa Electric Company's Annual Report on Form 10-K for the
year ended Dec. 31, 1993 and to the notes on pages 6 through
7 of this report.
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FORM 10-Q
BALANCE SHEETS
(thousands of dollars)
March 31, Dec. 31,
1994 1993
Assets
Property, plant and equipment,
at original cost
Utility plant in service $2,792,145 $2,773,652
Construction work in progress 166,436 151,311
2,958,581 2,924,963
Accumulated depreciation (1,076,256) (1,052,979)
1,882,325 1,871,984
Other property 201 201
1,882,526 1,872,185
Current assets
Cash and cash equivalents 3,184 4,499
Short-term investments 245 216
Receivables, less allowance
for uncollectibles 88,862 97,997
Inventories, at average cost
Fuel 81,379 77,438
Materials and supplies 38,468 37,726
Prepayments 9,349 10,062
221,487 227,938
Deferred debits
Unamortized debt expense 25,266 25,718
Deferred fuel expense 7,980 13,721
Deferred income taxes 39,060 37,045
Other 23,677 22,961
95,983 99,445
$2,199,996 $2,199,568
Liabilities and Capital
Capital
Common stock $ 704,631 $ 664,631
Retained earnings 174,498 182,939
879,129 847,570
Preferred stock, redemption not required 54,956 54,956
Long-term debt, less amount due
within one year 610,820 611,082
1,544,905 1,513,608
Current liabilities
Long-term debt due within one year 1,260 1,245
Notes payable 41,200 81,500
Accounts payable 69,738 87,791
Customer deposits 48,198 47,358
Interest accrued 14,249 10,522
Taxes accrued 27,775 6,151
202,420 234,567
Deferred credits
Deferred income taxes 291,306 292,573
Investment tax credits 64,818 66,033
Regulatory liability - tax related 61,215 61,973
Other 35,332 30,814
452,671 451,393
$2,199,996 $2,199,568
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF INCOME
(thousands of dollars)
For the three months ended March 31, 1994 1993
Operating revenues $244,629 $227,811
Operating expenses
Operation
Fuel 84,677 78,331
Purchased power 7,983 7,154
Other 42,121 36,026
Maintenance 16,836 16,095
Depreciation 28,613 27,705
Taxes, federal and state income 11,108 10,333
Taxes, other than income 21,977 20,211
213,315 195,855
Operating income 31,314 31,956
Other income
Allowance for other funds used
during construction 273 --
Other income (expense), net (14) (6,171)
259 (6,171)
Income before interest charges 31,573 25,785
Interest charges
Interest on long-term debt 8,944 10,535
Other interest 1,592 1,160
Allowance for borrowed funds
used during construction (636) (571)
9,900 11,124
Net income 21,673 14,661
Preferred dividend requirements 892 892
Balance applicable to
common stock $ 20,781 $ 13,769
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF CASH FLOWS
(thousands of dollars)
For the three months ended March 31, 1994 1993
Cash flows from operating activities
Net income $ 21,673 $ 14,661
Adjustments to reconcile net income
to net cash
Depreciation 28,613 27,705
Deferred income taxes (4,040) 4,565
Investment tax credits, net (1,216) (1,229)
Allowance for funds used
during construction (909) (571)
Deferred fuel cost 5,740 (9,778)
Fuel cost settlement -- 10,000
Refund to customers (2,306) --
Receivables, less allowance
for uncollectibles 9,135 8,398
Inventories (4,683) (2,447)
Taxes accrued 21,624 7,572
Accounts payable (15,757) (12,834)
Other 10,150 8,741
68,024 54,783
Cash flows from investing activities
Capital expenditures (39,560) (35,395)
Allowance for funds used
during construction 909 571
Short-term investments (29) 828
(38,680) (33,996)
Cash flows from financing activities
Proceeds from contributed capital
from parent 40,000 12,000
Repayment of long-term debt (245) --
Net decrease in short-term debt (40,300) (9,200)
Dividends (30,114) (30,171)
(30,659) (27,371)
Net decrease in cash and
cash equivalents (1,315) (6,584)
Cash and cash equivalents
at beginning of period 4,499 28,260
Cash and cash equivalents
at end of period $ 3,184 $ 21,676
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
A. Tampa Electric Company is a wholly owned subsidiary of
TECO Energy, Inc.
B. The company has made certain commitments in connection with
its continuing construction program. Total construction
expenditures are estimated to be $247 million for 1994.
C. As reported in the 1993 Form 10-K, the Florida Public Service
Commission (FPSC) issued an order on March 25, 1994 that changed
the company's authorized regulatory rate of return on common equity
to an 11.35 percent midpoint and a range of 10.35 percent to 12.35
percent, while leaving in effect the rates it had previously
established. In its order, the FPSC approved a $4-million annual
accrual for the establishment of an unfunded storm damage reserve
for transmission and distribution property and ordered that no
monies be subject to refund.
On April 11, 1994, the Office of Public Counsel (Public
Counsel) filed a petition with the FPSC for reconsideration of the
March 25, 1994 order rearguing that rates be reset to reflect the
new midpoint of the authorized regulatory return on common equity.
The company is opposing this petition for reconsideration.
- 6 -<PAGE>
FORM 10-Q
D. As reported in the 1993 Form 10-K, in February 1993, the FPSC
approved a settlement agreement between the company and Public
Counsel that resolved all issues related to prices for coal
purchased in the years 1990 through 1992 by the company from its
affiliate, Gatliff Coal Company, a subsidiary of TECO Coal
Corporation. The company agreed to refund $10 million plus
interest to its customers through the fuel adjustment clause over a
12-month period beginning April 1, 1993. As part of this agreement,
the company refunded $2.3 million to customers during the first
quarter of 1994. In the first quarter of 1993, the company
recorded a one-time $10-million pretax charge associated with this
settlement under the caption "Other income (expense), net".
- 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, 1994:
Net income for 1994's first quarter was $21.7 million,
$7 million higher than the year-earlier quarter primarily due to
the $10 million pretax charge recorded in the first quarter of 1993
associated with the coal pricing settlement discussed in Note D on
page 7. Operating income for 1994's first quarter was 2 percent
lower than in 1993, because higher revenues from retail energy
sales did not fully offset higher operation and maintenance expense
and property taxes and lower non-fuel revenues from sales to other
utilities.
Revenues increased $16.8 million in the first quarter of 1994,
reflecting a 10-percent increase in retail revenues due to higher
retail energy sales and the FPSC-approved $16-million price
increase effective in January 1994. Non-fuel revenues from sales to
other utilities decreased 10 percent from 1993's first quarter.
Lower-priced oil generation available on other systems continued to
affect adversely energy sales to other utilities.
Total retail energy sales were 4 percent higher than in the
prior year's first quarter, reflecting more favorable weather,
customer growth of 1.7 percent and an improving economy.
Combined fuel and purchased power expense increased
$7.2 million from the prior year's first quarter due to the timing
of the recognition of fuel expense under the FPSC-approved fuel
adjustment clause.
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FORM 10-Q
Operation-other and maintenance expenses increased
$6.8 million, or 13 percent, because of additional self-insured
liability reserves and higher employee-related expenses.
The increase in depreciation expense of $.9 million was due to
normal plant additions.
Income tax expense increased $.8 million or 8 percent from the
prior year's first quarter, reflecting higher pretax income and the
effect of increased federal corporate income tax rates. The
increased expense arising from higher income tax rates, retroactive
to Jan. 1, 1993, was recorded in the third quarter of 1993. The
first quarter 1993 income tax expense amount was not restated.
Taxes, other than income were up $1.8 million for the period
mainly from higher gross receipts taxes, which are included in
customers' bills, and from additional property and payroll taxes.
Interest expense, excluding allowance for borrowed funds used
during construction, was 10 percent lower than in 1993's first
quarter. The company refinanced over $240 million of long-term
debt in mid-1993 at lower rates. The effect of these refinancings
offset higher short-term debt balances and rates in 1994.
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FORM 10-Q
Capital Resources and Changes in Financial Condition
As discussed in Note C on page 6, the FPSC issued an order on
March 25, 1994 that changed the company's authorized regulatory
rate of return on common equity to an 11.35 percent midpoint and a
range of 10.35 percent to 12.35 percent, while leaving in effect
the rates it had previously established. In its order the FPSC
approved a $4-million annual accrual for the establishment of an
unfunded storm damage reserve for transmission and distribution
property and ordered that no monies be subject to refund.
On April 11, 1994, Public Counsel filed a petition with the
FPSC for reconsideration of the March 25, 1994 order rearguing that
rates be reset to reflect the new midpoint of the authorized
regulatory return on common equity. The company is opposing this
petition for reconsideration.
- 10 -<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 TECO Energy Directors' Deferred Compensation Plan, as
amended and restated effective April 1, 1994.
10.2 TECO Energy, Inc. Annual Incentive Compensation Plan,
revised January 1993.
12. Ratio of earnings to fixed charges.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
to which this report relates.
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FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
TAMPA ELECTRIC COMPANY
(Registrant)
Dated: May 5, 1994 By: /s/ L. L. Lefler
L. L. Lefler
Vice President - Controller
(Chief Accounting Officer)
- 12 -<PAGE>
FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
10.1 TECO Energy Directors' Deferred
Compensation Plan, as amended and restated
effective April 1, 1994. 14
10.2 TECO Energy, Inc. Annual Incentive 19
Compensation Plan, revised January 1993.
12. Ratio of earnings to fixed charges. 23
- 13 -<PAGE>
Exhibit 10.2
TECO ENERGY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
REVISED JANUARY, 1993
-19-<PAGE>
SUMMARY OF INCENTIVE COMPENSATION PLAN
BASIC PLAN CONCEPT
The Annual Incentive Compensation Plan provides a consistent framework for
applying incentive pay to officers of TECO Energy and each of its operating
subsidiaries. Each participant is assigned a target award amount,
expressed as a percentage of salary range midpoint, which will represent an
appropriate incentive payment when performance is judged to be at an
outstanding level. Smaller awards (or none at all) may be earned when
performance is below target and larger awards (up to 150 percent of target)
can be earned when performance exceeds target.
While not anticipated to be a common occurrence, the Board may occasionally
decide that the plan formula would unduly penalize or reward management for
results over which they had little or no influence. In such cases, award
funds may be increased or decreased to better meet the plan's intent of
relating rewards to management performance.
Performance for each participant will be measured, in part, against a
combination of one or more quantifiable profit and operational goals.
These goals will be set at the corporate and operating levels, and most
participants will have a portion of their awards related to each. The
remaining portion of each participant's performance that is not measured by
the quantified goals mentioned above, will be evaluated on a judgmental
basis considering overall contribution level and achievement of other
individual goals.
ELIGIBILITY
Officers are recommended by the respective President of their organization
and approved by the President and Chief Executive Officer of TECO Energy
for participation in the incentive plan each year. All nominated employees
who are approved by the President and Chief Executive Officer and the
Compensation Committee of the TECO Energy Board, will be eligible to
participate.
TARGET AWARD LEVELS
Target award levels are established at a level which, when combined with
each participant's base salary midpoint, will provide a fully competitive
total cash compensation opportunity. The incentive portion of the total
compensation opportunity reflects compensation "at risk" which is directly
related to performance and results achieved. Generally, the portion of
compensation "at risk" (i.e., the target award levels) is influenced by the
level of each participant's accountability for contributing to bottom-line
results, the degree of influence the participant has over results and
competitive practice.
-20-<PAGE>
ESTABLISHING PERFORMANCE GOALS AND WEIGHTINGS
For each plan year, profit, growth and/or operational effectiveness goals
will be established for TECO Energy and each of the operating subsidiaries.
The number of goals set for each unit and each operating subsidiary should
not normally exceed five or six so as not to dilute plan focus.
Once goals have been established that represent the target or stretch level
of performance, threshold and maximum levels should also be established.
Threshold performance represents the minimum acceptable performance that
still warrants incentive recognition (at 50 percent of the target award
level), and maximum performance represents the highest level likely to be
attained and rewarded (at 150 percent of the target award level).
Regardless of the degree of achievement of each established goal, there
will not be any plan payout to any company unless a corporate "shareholder
protection" threshold, i.e., TECO Energy's net earnings be at least 80% of
the current year's after tax earnings, is achieved.
Additionally, a further performance threshold of 90% of operating income
target must be achieved by each operating subsidiary for its plan
participants to be eligible for an award. TECO Energy participants must
achieve 90% of net income target to be eligible.
A determination will be made for each participant regarding their portion
of the award that will be based on corporate, subsidiary or individual
performance. Generally, the weightings among these three measurement
groups will vary by organizational level.
AWARD DETERMINATION
At the end of each plan year, a three step process will be followed in
determining actual incentive awards.
Step 1: The actual degree of achievement for each goal at the
Corporate, Subsidiary and Individual level must be
determined.
Step 2: Corporate, Subsidiary and Individual performance
factors must be determined by multiplying levels of
goal achievement by the weightings assigned to each
goal and summing the results. Performance factors can
range between 0 and 150 percent.
Step 3: Total of all performance factors are multiplied by the
target award.
PLAN ADMINISTRATION
The Vice President, Human Resources, TECO Energy, Inc., is responsible for
administering the plan.
-21-<PAGE>
OTHER CONSIDERATIONS
If a participant's employment is terminated due to death, total disability,
or retirement during a plan year, the participant or beneficiary may be
entitled to receive a pro rata share of the incentive award. The TECO
Energy Board Compensation Committee will determine if any award will be
paid, and if so, the amount of the award.
If a participant is transferred or promoted to another position within
TECO Energy, that individual may be eligible to receive a pro rata share
of the award, as determined by the TECO Energy Board Compensation
Committee.
If a participant's employment is terminated for reasons not described
above, the TECO Energy Board Compensation Committee will have complete
discretion in determining if an award will be paid.
Notwithstanding the foregoing, in the event of a participant's termination
of employment for any reason following a change in control of TECO Energy,
Inc., as defined in the TECO Energy, Inc. 1990 Stock Option and
Appreciation Rights Plan, such participant shall be entitled to receive an
incentive award equal to a pro rata share of the greater of (i) the target
bonus for the year in which the change in control occurs or (ii) the bonus
actually paid with respect to the previous year.
-22-<PAGE>
Exhibit 10.2
TECO ENERGY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
REVISED JANUARY, 1993
-19-<PAGE>
SUMMARY OF INCENTIVE COMPENSATION PLAN
BASIC PLAN CONCEPT
The Annual Incentive Compensation Plan provides a consistent framework for
applying incentive pay to officers of TECO Energy and each of its operating
subsidiaries. Each participant is assigned a target award amount,
expressed as a percentage of salary range midpoint, which will represent an
appropriate incentive payment when performance is judged to be at an
outstanding level. Smaller awards (or none at all) may be earned when
performance is below target and larger awards (up to 150 percent of target)
can be earned when performance exceeds target.
While not anticipated to be a common occurrence, the Board may occasionally
decide that the plan formula would unduly penalize or reward management for
results over which they had little or no influence. In such cases, award
funds may be increased or decreased to better meet the plan's intent of
relating rewards to management performance.
Performance for each participant will be measured, in part, against a
combination of one or more quantifiable profit and operational goals.
These goals will be set at the corporate and operating levels, and most
participants will have a portion of their awards related to each. The
remaining portion of each participant's performance that is not measured by
the quantified goals mentioned above, will be evaluated on a judgmental
basis considering overall contribution level and achievement of other
individual goals.
ELIGIBILITY
Officers are recommended by the respective President of their organization
and approved by the President and Chief Executive Officer of TECO Energy
for participation in the incentive plan each year. All nominated employees
who are approved by the President and Chief Executive Officer and the
Compensation Committee of the TECO Energy Board, will be eligible to
participate.
TARGET AWARD LEVELS
Target award levels are established at a level which, when combined with
each participant's base salary midpoint, will provide a fully competitive
total cash compensation opportunity. The incentive portion of the total
compensation opportunity reflects compensation "at risk" which is directly
related to performance and results achieved. Generally, the portion of
compensation "at risk" (i.e., the target award levels) is influenced by the
level of each participant's accountability for contributing to bottom-line
results, the degree of influence the participant has over results and
competitive practice.
-20-<PAGE>
ESTABLISHING PERFORMANCE GOALS AND WEIGHTINGS
For each plan year, profit, growth and/or operational effectiveness goals
will be established for TECO Energy and each of the operating subsidiaries.
The number of goals set for each unit and each operating subsidiary should
not normally exceed five or six so as not to dilute plan focus.
Once goals have been established that represent the target or stretch level
of performance, threshold and maximum levels should also be established.
Threshold performance represents the minimum acceptable performance that
still warrants incentive recognition (at 50 percent of the target award
level), and maximum performance represents the highest level likely to be
attained and rewarded (at 150 percent of the target award level).
Regardless of the degree of achievement of each established goal, there
will not be any plan payout to any company unless a corporate "shareholder
protection" threshold, i.e., TECO Energy's net earnings be at least 80% of
the current year's after tax earnings, is achieved.
Additionally, a further performance threshold of 90% of operating income
target must be achieved by each operating subsidiary for its plan
participants to be eligible for an award. TECO Energy participants must
achieve 90% of net income target to be eligible.
A determination will be made for each participant regarding their portion
of the award that will be based on corporate, subsidiary or individual
performance. Generally, the weightings among these three measurement
groups will vary by organizational level.
AWARD DETERMINATION
At the end of each plan year, a three step process will be followed in
determining actual incentive awards.
Step 1: The actual degree of achievement for each goal at the
Corporate, Subsidiary and Individual level must be
determined.
Step 2: Corporate, Subsidiary and Individual performance
factors must be determined by multiplying levels of
goal achievement by the weightings assigned to each
goal and summing the results. Performance factors can
range between 0 and 150 percent.
Step 3: Total of all performance factors are multiplied by the
target award.
PLAN ADMINISTRATION
The Vice President, Human Resources, TECO Energy, Inc., is responsible for
administering the plan.
-21-<PAGE>
OTHER CONSIDERATIONS
If a participant's employment is terminated due to death, total disability,
or retirement during a plan year, the participant or beneficiary may be
entitled to receive a pro rata share of the incentive award. The TECO
Energy Board Compensation Committee will determine if any award will be
paid, and if so, the amount of the award.
If a participant is transferred or promoted to another position within
TECO Energy, that individual may be eligible to receive a pro rata share
of the award, as determined by the TECO Energy Board Compensation
Committee.
If a participant's employment is terminated for reasons not described
above, the TECO Energy Board Compensation Committee will have complete
discretion in determining if an award will be paid.
Notwithstanding the foregoing, in the event of a participant's termination
of employment for any reason following a change in control of TECO Energy,
Inc., as defined in the TECO Energy, Inc. 1990 Stock Option and
Appreciation Rights Plan, such participant shall be entitled to receive an
incentive award equal to a pro rata share of the greater of (i) the target
bonus for the year in which the change in control occurs or (ii) the bonus
actually paid with respect to the previous year.
-22-<PAGE>
Exhibit 12
TAMPA ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the company's ratio of earnings to
fixed charges for the periods indicated.
Three Months Twelve Months
Ended Ended Year Ended December 31,
March 31, 1994 March 31, 1994 1993(1) 1992 1991 1990 1989
3.37x 4.21x 3.98x 4.16x 3.66x 3.64x 3.67x
For the purposes of calculating this ratio, earnings consist of income
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 the non-recurring $10 million pretax charge
associated with a coal pricing settlement as discussed in Note D on
page 7. The effect of this charge was to reduce the ratio of earnings
to fixed charges. Had this non-recurring charge been excluded from
the calculation, the ratio of earnings to fixed charges would have
been 4.17x for the year ended Dec. 31, 1993. <PAGE>
