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, 1998
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, 1998):
Common Stock, Without Par Value 10
The registrant meets the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the
reduced disclosure format.<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of management, the unaudited financial statements
include all adjustments necessary to present fairly the results
for the three-month periods ended March 31, 1998 and 1997. The
1997 financial statements include the results of Peoples Gas
System, Inc., and West Florida Natural Gas Company, both of which
were merged into Tampa Electric Company in June 1997. Both
mergers were accounted for as poolings of interests. 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, 1997 and
to the notes on pages 6 through 8 of this report.
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FORM 10-Q
BALANCE SHEETS
(in millions)
March 31, Dec. 31,
1998 1997
Assets
Property, plant and equipment,
at original cost
Utility plant in service
Electric $3,652.6 $3,632.0
Gas 481.2 471.1
Construction work in progress 42.2 40.6
4,176.0 4,143.7
Accumulated depreciation (1,630.2) (1,595.3)
2,545.8 2,548.4
Other property 6.8 6.5
2,552.6 2,554.9
Current assets
Cash and cash equivalents 1.3 2.8
Receivables, less allowance
for uncollectibles 127.8 161.4
Inventories, at average cost
Fuel 83.2 69.5
Materials and supplies 46.0 45.6
Prepayments 6.8 7.3
265.1 286.6
Deferred debits
Unamortized debt expense 17.0 17.5
Deferred income taxes 113.1 112.2
Regulatory asset - tax related 41.2 41.8
Other 81.2 85.9
252.5 257.4
$3,070.2 $3,098.9
Liabilities and Capital
Capital
Common stock $1,012.1 $ 972.1
Retained earnings 283.1 289.6
1,295.2 1,261.7
Long-term debt, less amount due
within one year 726.7 727.1
2,021.9 1,988.8
Current liabilities
Long-term debt due within one year 4.2 4.1
Notes payable 140.6 219.1
Accounts payable 105.6 118.4
Customer deposits 78.1 77.3
Interest accrued 25.8 18.7
Taxes accrued 16.6 8.5
370.9 446.1
Deferred credits
Deferred income taxes 423.9 415.6
Investment tax credits 48.5 49.7
Regulatory liability - tax related 75.8 77.0
Other 129.2 121.7
677.4 664.0
$3,070.2 $3,098.9
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF INCOME
(in millions)
For the three months ended March 31, 1998 1997
Operating revenues
Electric $273.4 $272.8
Gas 80.7 76.8
354.1 349.6
Operating expenses
Operation
Fuel - electric generation 89.1 88.7
Purchased power 11.3 10.8
Natural gas sold 38.0 38.0
Other 51.2 52.2
Maintenance 21.8 18.0
Non-recurring charge 9.6 --
Depreciation 41.3 39.9
Taxes, federal and state income 16.1 20.5
Taxes, other than income 29.8 29.6
308.2 297.7
Operating income 45.9 51.9
Other income
Allowance for other funds used
during construction -- .1
Other income (expense), net (1.9) (.3)
(1.9) (.2)
Income before interest charges 44.0 51.7
Interest charges
Interest on long-term debt 12.2 12.7
Other interest 4.6 4.0
16.8 16.7
Net income 27.2 35.0
Preferred dividend requirements -- .2
Balance applicable to common stock $ 27.2 $ 34.8
The accompanying notes are an integral part of the financial statements.
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FORM 10-Q
STATEMENTS OF CASH FLOWS
(in millions)
For the three months ended March 31, 1998 1997
Cash flows from operating activities
Net income $ 27.2 $ 35.0
Adjustments to reconcile net income
to net cash:
Depreciation 41.3 39.9
Deferred income taxes 7.2 (5.5)
Investment tax credits, net (1.2) (1.2)
Allowance for funds used
during construction -- (.1)
Deferred recovery clause 4.2 1.2
Deferred revenue (8.7) (7.3)
Refund to customers -- (5.9)
Non-recurring charge 9.6 --
Receivables, less allowance
for uncollectibles 33.6 31.6
Inventories (14.1) (6.7)
Taxes accrued 8.1 2.9
Accounts payable (12.8) 8.4
Other 16.1 (.6)
110.5 91.7
Cash flows from investing activities
Capital expenditures (39.4) (31.3)
Allowance for funds used
during construction -- .1
(39.4) (31.2)
Cash flows from financing activities
Proceeds from contributed capital
from parent 40.0 --
Repayment of long-term debt (.3) (.3)
Net decrease in short-term debt (78.5) (17.7)
Dividends (33.8) (37.0)
(72.6) (55.0)
Net increase (decrease) in cash
and cash equivalents (1.5) 5.5
Cash and cash equivalents at
beginning of period 2.8 3.5
Cash and cash equivalents at end of period $ 1.3 $ 9.0
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. In June 1997, TECO Energy completed its mergers with Lykes
Energy, Inc. (the Peoples companies) and West Florida Gas Inc. (West
Florida). Concurrent with these mergers, the regulated natural gas
distribution utilities acquired began operating as the Peoples Gas
System division of Tampa Electric Company.
These mergers were accounted for as poolings of interests and,
accordingly, Tampa Electric Company's financial statements for 1997
include the results of Peoples Gas System.
The company's combined restated revenues and net income for the
three-month period ended March 31, 1997 were as follows:
Combining Results
(unaudited)
Three Months Ended
March 31, 1997
Net
(millions) Revenues Income
Tampa Electric pre-merger (1) $272.8 $27.9
Peoples Gas System pre-merger 69.7 6.4
West Florida Gas pre-merger 7.1 .7
Combined $349.6 $35.0
(1) The 1997 amounts were previously reported on Form 10-Q for the
quarter ended March 31, 1997.
C. The company has made certain commitments in connection with its
continuing construction program. Total construction expenditures
during 1998 are estimated to be $128 million for the electric division
and $59 million for Peoples Gas System.
D. D u ring the first quarter of 1998, the electric division
recognized $8.7 million of revenues that had been deferred in 1995 and
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FORM 10-Q
1996 pursuant to regulatory agreements approved by the Florida Public
Service Commission (FPSC). During the first three months of last
year, the electric division recognized $7.3 million of revenues
previously deferred and refunded $5.9 million to customers under these
agreements.
As of March 31, 1998, $22.6 million of deferred revenues were
included in other deferred credits. Accrued interest on these deferred
revenues was $8.5 million at March 31, 1998.
Effective Oct. 1, 1997, electric customers began receiving a $25-
million temporary base rate reduction over a 15-month period pursuant
to the same agreements.
E. In June 1997, the Financial Accounting Standards Board issued
Financial Accounting Standards (FAS) 130, Reporting Comprehensive
Income, effective for fiscal periods beginning after Dec. 15, 1997.
The new 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.
For the three-month periods ended March 31, 1998 and 1997, there were
no components of comprehensive income other than net income.
F. As discussed in Tampa Electric Company's 1997 Annual Report on
Form 10-K, the FPSC in September 1997 ruled that costs associated with
two Tampa Electric long-term wholesale power sales contracts should be
assigned to the wholesale jurisdiction and that for retail rate making
purposes the costs transferred from retail to wholesale should reflect
average costs rather than the lower incremental costs on which the two
contracts are based. As a result of this decision and the related
- 7 -<PAGE>
FORM 10-Q
reduction of the retail rate base upon which Tampa Electric is allowed
to earn a return, these contracts became uneconomic. One contract was
terminated in 1997. Tampa Electric has entered into firm power
purchase contracts for the balance of its obligation with other
electric power suppliers for replacement power through 1999. The cost
of power under the replacement contracts exceeds the revenues expected
from the remaining contract. As a result, Tampa Electric recorded a
one-time $5.9-million after-tax charge in the first quarter of 1998.
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FORM 10-Q
Item 2. Management's Narrative Analysis of Results of Operations
Three months ended March 31, 1998:
Net income for the three-month period ended March 31, 1998,
including a non-recurring after-tax charge of $5.9 million, was $27.2
million, compared to $35.0 million for the same period last year.
In 1998's first quarter, the electric division recorded a charge
associated with actions to mitigate the effects of the 1997 FPSC
ruling that separated certain wholesale power sales contracts from the
retail jurisdiction through 1999.
Operating income for the quarter of $51.8 million, excluding the
charge discussed above and on page 9, was unchanged from 1997's first
quarter as the effect of increased therm sales at Peoples Gas System
was partially offset by increased depreciation expense at the electric
division, the result of higher plant balances.
Contributions by operating division
Operating income
(millions) 1998 1997
Electric division (1) $ 41.4 $ 41.8
Peoples Gas System 10.4 10.1
51.8 51.9
Non-recurring charge, after tax (5.9) --
$ 45.9 $ 51.9
(1) Operating income for 1998 excludes the after-tax non-recurring
charge discussed above and on page 9.
Electric division
Operating revenues for the quarter were unchanged from 1997, as
the adverse effect of unusual weather and the impact of the temporary
base rate reduction discussed in Note D on page 7 was offset by
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FORM 10-Q
customer growth of 2.1 percent. Retail energy sales were unchanged
from the prior year's period.
Depreciation expense increased in the current year's first
quarter as a result of higher plant balances. Operations and
maintenance expenses were unchanged from the prior year's period.
As discussed in Note F on pages 7 and 8, Tampa Electric recorded
a one-time $5.9-million after-tax charge in the first quarter of 1998
related to the 1997 FPSC ruling that separated certain wholesale power
sales contracts from the retail jurisdiction through 1999.
Peoples Gas System
At Peoples Gas System, operating income was three percent higher
in the first quarter of 1998.
Total revenues were up five percent from 1997's first quarter,
with residential and commercial natural gas sales (therms) eight
percent higher than in last year's first quarter due to customer
growth and increased usage.
Derivatives and Hedging Policy
Peoples Gas System enters into futures, swaps and options
contracts, from time to time, to limit the effects of natural gas
price increases on the prices it charges customers.
Tampa Electric Company does not use derivatives or other
financial products for speculative purposes.
- 10 -<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 TECO Energy, Inc., Annual Incentive Compensation Plan, as amended
and restated as of April 15, 1998.
10.2 Agreement and General Release between Tampa Electric Company and
Keith S. Surgenor dated March 20, 1998.
12. Ratio of earnings to fixed charges.
27.1 Financial data schedule - three months ended March 31, 1998.
(EDGAR filing only)
27.2 Restated financial data schedule - three months ended March 31,
1997. (EDGAR filing only)
(b) 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 14, 1998
By: /s/ W. L. Griffin
W. L. Griffin
Vice President - Controller
(Principal Accounting Officer)
- 12 -<PAGE>
FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page No.
10.1 TECO Energy, Inc., Annual Incentive Compensation 14
Plan, as amended and restated as of April 15,
1998.
10.2
Agreement and General Release between Tampa 17
Electric Company and Keith S. Surgenor dated
March 20, 1998.
12. Ratio of earnings to fixed charges 26
27.1 Financial data schedule - three months ended
March 31, 1998 (EDGAR filing only) --
27.2 Restated financial data schedule - three months
ended March 31, 1997 (EDGAR filing only) --
- 13 -<PAGE>
Exhibit 10.1
April 15,1998
TECO ENERGY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
REVISED APRIL, 1998
14<PAGE>
Exhibit 10.1
ANNUAL INCENTIVE COMPENSATION PLAN
BASIC PLAN CONCEPT
The Annual Incentive Compensation Plan provides a consistent framework
for applying annual incentive pay to officers of TECO Energy and each
of its operating units. 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 at the
targeted level. Smaller awards (or none at all) may be earned when
performance is below target, and larger awards may 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. 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 subjective basis considering overall contribution level and
achievement of other individual goals. Each participant will have a
Business Challenge goal, to reflect the participant s contribution
to: (a) mitigating the impact of unexpected adverse business or
regulatory developments on the business unit or (b) enhancing
profitability or capacity for profit, through effective management
initiatives beyond those included in the business plan.
ELIGIBILITY
Officers are recommended by the respective President of their
organization for participation in the annual incentive plan each year.
All recommended officers that are approved by the Chief Executive
Officer of TECO Energy 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 that, 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 level) is influenced by the level of the participant's
accountability for contributing to bottom-line results, the degree of
influence the participant has over results and competitive practice.
15<PAGE>
Exhibit 10.1
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 its operating
units. The number of goals set for each unit and each operating unit
should not normally exceed five or six so as not to dilute plan focus.
Once goals have been established that represent the target level of
performance, threshold and maximum levels should also be established.
Threshold performance represents the minimum acceptable performance
that still warrants incentive recognition (paid at 50 percent of the
target award level), and maximum performance represents the highest
level likely to be attained (paid at 150 percent of the target award
level for all goals, except the Business Challenge goal which can be
paid at 200%).
Regardless of the degree of achievement of each established goal,
there will not be any plan payout to any participant for any year
unless a corporate "shareholder protection" threshold, i.e., that TECO
Energy's net earnings for that year be at least 80 percent of that
year's targeted net earnings, is achieved.
Additionally, a further performance threshold of 90 percent of
operating income target must be achieved by each operating unit for
its participants to be eligible for an award. TECO Energy must
achieve 90 percent of its net income target for its participants to be
eligible.
A determination will be made for each participant regarding their
portion of the award that will be based on corporate, operating unit
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 four step process will be followed in
determining actual incentive awards.
Step 1: The actual degree of achievement for each goal at the
corporate, operating unit and individual level is determined.
Levels of achievement can range up to 200% for the Business
Challenge goal and up to 150% for all other goals.
Step 2: Corporate, operating unit and individual performance factors
are determined by multiplying levels of goal achievement by the
weightings assigned to each goal.
Step 3: The total of all performance factors is multiplied by the
target award, producing the calculated award.
Step 4: The calculated award may be adjusted up or down by the
Compensation Committee of the TECO Energy Board with respect to
the senior officers and by the Chief Executive Officer of TECO
Energy with respect to other officers based on the participant's
total performance during the plan year. The actual award, as so
adjusted, may not exceed 150 percent of the target award level.
16<PAGE>
Exhibit 10.1
PLAN ADMINISTRATION
The Compensation Committee of the TECO Energy Board, the Chief
Executive Officer of TECO Energy and the respective Presidents shall
perform the functions set forth in this plan. The Compensation
Committee may elect to discharge its responsibility in the form of
recommendations to the TECO Energy Board. The Vice President-Human
Resources of TECO Energy is responsible for administering the plan.
OTHER CONSIDERATIONS
For any year in which a participant's employment is terminated or an
officer first becomes eligible for participation in the plan, whether
any incentive award shall be granted for that year and the amount of
any such award shall be determined by the Compensation Committee of
the TECO Energy Board with respect to senior officers and by the Chief
Executive Officer of TECO Energy with respect to other officers.
Notwithstanding the foregoing, for any year in which a participant's
employment terminates for any reason following a change in control of
TECO Energy, as defined in the TECO Energy 1996 Equity Incentive Plan,
such participant shall be entitled to receive an incentive award equal
to (a) the number of days employed during that year divided by 365
multiplied by (b) the greater of (i) the participant's target award
for the year in which the change in control occurred or (ii) the
incentive award actually paid to the participant with respect to the
year immediately preceding the year in which the termination of
employment occurred.
17<PAGE>
Exhibit 10.2
TAMPA ELECTRIC COMPANY
AGREEMENT AND GENERAL RELEASE
THIS AGREEMENT AND GENERAL RELEASE (the "Agreement") is made and
entered into this day of March, 1998, by and between KEITH
S. SURGENOR, 15103 Contoy Place, Tampa, Florida 33618 (the "Officer")
and TAMPA ELECTRIC COMPANY (the "Company").
WHEREAS, the Officer is currently employed in the position of
President and Chief Operating Officer; and
WHEREAS, the Officer and the Company have agreed that it is in
their mutual best interests that the Officer no longer serve in his
present position or to continue his employment with the Company
commencing April 1, 1998, subject to the terms and conditions of this
Agreement, and;
WHEREAS, in recognition of the Officer's service to the Company,
the Company desires to extend certain benefits and to make certain
payments to the Officer in order to effect a just separation; and
WHEREAS, the parties have mutually agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. RESIGNATION DATE
(a) The Officer hereby resigns his employment with the Company
effective as of April 1, 1998 (the "Resignation Date").
(b) Contemporaneously with the Officer's execution and delivery
of this Agreement, the Officer agrees to deliver the attached letter
of resignation from his position of President and Chief Operating
Officer of Tampa Electric Company.
(c) The Officer and the Company agree to cooperate in the
development of joint internal and external announcements prior to the
Resignation Date in connection with his resignation. Upon issuance
of such announcements, the Officer agrees that he will refer all
inquiries from the news media to the Company for handling. The
Officer and the Company shall approve a statement which sets out the
reason for the Officer's resignation which shall be used in the event
that the Company is contacted by any prospective employer or by any
person or company seeking information about the reason for such
Officer's resignation.
17<PAGE>
Exhibit 10.2
2. COMPENSATION AND BENEFITS
(a) From the date of this Agreement up to the Resignation Date,
the Officer shall remain a full-time employee of the Company in the
aforesaid position, shall continue to receive his monthly base salary
of $26,667.00 per month and shall remain eligible for all of the
Company's employee benefit plans in accordance with their terms. From
the date of this Agreement, the Officer shall have no duties and
responsibilities and shall not represent or hold himself out to have
a u thority to represent the Company unless he is specifically
authorized to do so in writing by the Company's Chief Executive
Officer or his designee.
(b) Subject to the issuance of the announcement contemplated by
Section 1(c), the Company shall make payments to the Officer as
follows:
(i) a lump-sum payment for his accrued but unused vacation
allowance for 1998 as specified in Administrative
Policy I.3.1, Paragraph III B;
(ii) a lump-sum payment comprised of the following:
(x) an amount equal to two times the sum of the
Officer's base salary as of the Resignation Date and
the average of his incentive payments for the calendar
years 1996 and 1997; and
(y) an amount equal to the present value of two (2)
additional years of age and service credit under the
Officer's Supplemental Executive Retirement Plan (the
"SERP").
(iii) a payment equal to the present value of the
Officer's SERP as of the Resignation Date, paid as a lump-
sum in accordance with the Officer's election.
(c) All of the restricted stock granted to the Officer under the
TECO Energy, Inc. 1996 Equity Incentive Plan shall vest for the
benefit of the Officer as of the Resignation Date subject to the
provisions of such plan.
(d) All of the Officer's outstanding TECO Energy, Inc. stock
options shall remain exercisable by the Officer for the term of each
applicable stock option grant in accordance with the provisions of
such grant.
(e) All benefits granted or amounts paid by the Company as
provided in Sections 2(a), (b), and (c) above shall be reduced by the
amount of applicable FICA and federal withholding taxes.
18<PAGE>
Exhibit 10.2
(f) For a period of six (6) months from the Resignation Date,
the Company agrees to purchase from the Officer his primary residence
located at 15103 Contoy Place in Tampa, Florida for an amount equal to
fair market value based on an appraisal by a qualified appraiser
agreed to by the Officer and the Company. During the twelve (12)
months following the date of this Agreement, the Company will
reimburse the Officer for moving and storage expenses related to his
relocation from Tampa, Florida to another domicile and temporary
living expenses in such domicile, if necessary, for up to six (6)
months during such period which combined expenses for moving, storage
and temporary living, in the aggregate, do not exceed $17,500.00 and
are supported by proper documentation.
(g) For a period of two (2) years from the Resignation Date, the
Company will reimburse the Officer for the amount of the premium for
the Officer's medical insurance which he obtains pursuant to COBRA
upon receipt by the Company of the invoice to be submitted by the
Officer within thirty (30) days of his having paid it.
(h) For a period of two (2) years from the Resignation Date, the
Company shall pay the Officer an amount equal to the premium payable
by the Officer upon exercising his conversion rights under the
Company's life insurance plan to purchase life insurance with coverage
in the current amount benefitting the Officer. Such amount payable by
the Company shall be grossed up to reflect the same tax-favored
treatment to the Officer as if the Company had continued to provide
the coverage under its life insurance plan.
3. CONFIDENTIALITY AND OTHER CONDUCT
(a) The Officer recognizes and acknowledges that during the
course of his employment with the Company, he has developed,
participated in the development of, been exposed to, has had access
to, and has had disclosed to him information and material developed
specifically by and for the benefit of the Company (including its
parent company and other subsidiaries), sensitive and/or proprietary
information, strategic planning and financial information, business
planning, operations and marketing information, and personnel and
plant security information, and, in each case, specific Company
policies, practices and procedures related thereto and other matters,
including without limitation trade secrets, trademarks, service marks,
trademarked and copyrighted material, patents, patents pending,
financial and data processing information, data bases, interfaces,
and/or source codes, Company procedures, specifications, commercial
information or other Company or Customer records as described in
Administrative Policies I.8.7. and I.1.28, including any information
or material, belonging to others which has been provided to the
Company on a confidential basis, all of which are hereinafter referred
to as "Confidential Information."
19<PAGE>
Exhibit 10.2
(b) The Officer agrees to maintain, in strict confidence, the
Confidential Information and agrees not to disclose the Confidential
Information or the fact of, the terms of or the amount of the
consideration paid as part of this Agreement to any third party or to
use the Confidential Information to benefit himself or any third
party. The Officer shall be prohibited from using, duplicating,
reproducing, copying, distributing or disclosing the Confidential
I n f ormation regardless of form or purpose, including without
limitation verbal disclosure, data, documents, electronic media or any
other media form. The Officer also agrees to continue to abide by the
non-disclosure and non-use obligations relating to Company records,
information, and property contained in the Company's Standards of
Integrity.
(c) The restrictions on the Officer's disclosure of Confidential
Information set out herein do not apply to such information which (i)
is now, or which hereafter, through no act or failure to act on the
part of the Officer becomes, generally known or available to the
public; or (ii) is required to be disclosed by a court of competent
jurisdiction or by an administrative or quasi-judicial body having
jurisdiction over the subject matter after the Officer has given the
Company reasonable prior notice of such disclosure requirement.
(d) The Officer agrees to conduct himself in all actions or
conduct relating to the Company in a manner consistent with existing
Company policy and to refrain from engaging in any conduct or activity
that in any manner harasses or interferes with the Company, its
employees, officers and/or directors or holds the Company up to
ridicule in the community or which jeopardizes or adversely affects
the business or reputation of the Company.
(e) The Officer hereby waives all rights to employment with the
Company and agrees not to seek employment with the Company at any time
in the future.
4. COMPETITION
(a) C o venant Not to Compete. The Officer, directly or
indirectly, in any capacity, either for himself, or on behalf of any
corporation, partnership, joint venture, business trust, or other
person or entity, shall not:
For a period of two (2) years commencing on the date of this
Agreement ("Prohibited Period"), (i) engage in any business, or
acquire an interest in any business (except as the beneficial owner of
publicly-traded stock), or become affiliated as an agent, consultant,
employee, partner, director, officer, stockholder, or proprietor of or
provide any consulting services to any business that is an electric or
gas utility, a power marketer, a gas marketer, an energy services
company, an independent power producer, cogenerator, electric
20<PAGE>
Exhibit 10.2
wholesale generator, municipal electric or gas utility or electric
cooperative having its principal place of business within the State of
Florida or engage in, or provide services with respect to, strategic
planning, marketing and sales in the State of Florida for any of the
foregoing businesses regardless of its principal place of business
("Competitor"); (ii) solicit, divert, do business with, or accept
business from any person who is or has been a customer of the Company
if such solicitation, diversion or business has the effect of or
results in the Company's loss of all or a portion of such customer's
business or potential business; (iii) represent any person in its
dealings with the Company; (iv) influence or attempt to influence any
employee of the Company to terminate his/her employment with the
Company for the purpose of working for a Competitor; or (v) influence
or attempt to influence any agent, customer, supplier, or distributor
who has a business relationship with the Company to cease or adversely
alter its business relations with the Company.
(b) Consideration. In consideration for Officer's agreement to
the preceding covenant not to compete set forth in Section 4(a) above,
the Company agrees to pay the Officer TWO HUNDRED THOUSAND AND NO/100
DOLLARS ($200,000.00) payable quarterly in the amount of TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($25,000.00). Such payments shall be due
throughout the Prohibited Period so long as the Officer adheres to the
covenant not to compete set forth in Section 4(a) hereof, breach of
which shall entitle the Company to cease making such payments during
the period of such breach in addition to the other remedies set forth
in Section 6 hereof. Such payments shall be made on the first day of
the month immediately following the last day of each calendar quarter.
The first payment hereunder shall be due on July 1, 1998.
The Officer's covenant not to compete pursuant to Section 4(a) is
independent of any obligation of the Company to the Officer, including
any obligation of the Company to the Officer under this Agreement, and
is not subject to any setoff, defense, deduction, or counterclaim
based on any claim that the Officer might have against the Company.
The Officer stipulates that the geographic scope, duration, and the
related restrictions are reasonable limitations necessary to protect
the Company's business interests, and such restrictions do not
unreasonably prevent the Officer from obtaining acceptable
professional or occupational employment opportunities. The Officer
acknowledges that his position with the Company has given him access
to the Confidential Information defined herein, certain specialized
knowledge and training not readily available to him otherwise, and
that he has been directly and indirectly responsible for, participated
in and contributed to the development of and managed certain of the
C o mpany's marketing and competitive business strategies. The
Prohibited Period covering the obligations set forth in Section 4(a)
above shall be extended by any period of time during which the Officer
is in breach of such obligation.
21<PAGE>
Exhibit 10.2
(c) Reformation. Each provision of the covenant set forth in
Section 4(a) shall be construed and interpreted so that it is valid
and enforceable under applicable law. However, if a court of
competent jurisdiction determines that the duration, geographical
area, or proscribed activities contained in the restrictions under
this Agreement would cause strict application of those restrictions to
be invalid or unenforceable in a particular jurisdiction, the
restrictions automatically will be reformed to shorten their duration,
d i minish their geographical area, or confine their proscribed
activities to the extent necessary (but only to such extent) to make
the restrictions valid and enforceable.
5. RELEASE OF CLAIMS AND INDEMNIFICATION
(a) For and in consideration of the payments and increased
benefits made to the Officer pursuant to Section 2 hereof, the
Officer, for himself, his heirs, executors, administrators, successors
and assigns, hereby releases and agrees to hold harmless the Company
(which, for purposes of this section includes the Company and any
agent, officer, director or employee thereof) from all claims, rights,
causes of action or liabilities of whatever nature, whether at law or
in equity, against the Company that the Officer, his heirs, executors,
administrators, successors, and assigns, may now have or hereafter
can, shall or may have for, upon, or by reason of any matter, cause or
thing, whatsoever, which has happened, developed or occurred on or
before the date of this Agreement, arising out of Officer's employment
with or termination of employment from the Company or resignation
hereunder, including, but not limited to, claims for wrongful
termination, discrimination, retaliation, invasion of privacy,
defamation, slander, and/or intentional infliction of emotional
distress and those claims arising under any federal, state, or local
discrimination or civil rights or labor laws and/or rules or
regulations, and/or common law, whether in contract or in tort, as
they relate to the employment relationship of the Employee/Employer
( i n c l uding without limitation claims arising under the Age
D i s crimination in Employment Act, the Older Workers' Benefit
Protection Act (29 USC 626), Title VII of the Civil Rights Act of
1964, or the Employee Retirement Income Security Act, as such laws
have been or may be amended from time to time).
(b) The Officer acknowledges and agrees that this Agreement
shall not be construed as an admission by Company of any improper or
unlawful actions or of any wrongdoing whatsoever against Officer or
any other persons, and Company expressly denies any wrongdoing
whatsoever against Officer or any other employee.
(c) The Officer covenants with and represents to the Company
that he is the sole owner of any and all claims being waived and from
which the Company is being released by the Officer in Section 5(a)
above and hereby covenants with and agrees to indemnify and save and
22<PAGE>
Exhibit 10.2
hold harmless the Company against any and all liability, claims,
suits, damages, costs, losses and expenses whatsoever, in any manner
resulting from or arising out of the matters released above. The
Company agrees to indemnify and save and hold harmless the Officer in
accordance with the provisions of the Company's Bylaws, to the extent
permitted by law, against all expenses and liabilities incurred in
connection with any threatened, pending or completed proceeding to
which the Officer is or becomes a party by reason of the fact that he
was an officer or employee of the Company. The Company's obligation
to indemnify the Officer hereunder is subject to the Officer providing
the Company with prompt written notice of any threatened or existing
suit, proceeding or claim.
6. REMEDIES
(a) Remedy at Law Insufficient. The parties acknowledge that
damages at law will be an insufficient remedy if: Officer violates
the terms of Sections 3, 4 and 5 hereof or if the Company or Officer
breach the covenants contained in Section 1(c) hereof, or if the
Company inappropriately fails to make the payments pursuant to Section
2 hereof, and that each would suffer irreparable damage as a result of
such violation. Accordingly, upon a violation of any of the covenants
set out in such Sections applicable to the parties, the affected
party, either Officer or the Company without excluding or limiting any
other available remedy, shall be entitled to the following remedies:
(1) Upon posting bond of $1,000.00 and filing with a court
of competent jurisdiction an appropriate pleading and affidavit
specifying each obligation breached by Officer or the Company,
automatic entry by a court having jurisdiction of an order granting an
injunction or specific performance compelling the defaulting party or
parties to comply with that obligation, without proof of monetary
damage or an inadequate remedy at law; and
(2) Reimbursement of all costs and expenses reasonably
incurred by the non-defaulting party in enforcing those obligations or
otherwise defending or prosecuting any litigation arising out of the
defaulting party's obligations, including premiums for bonds, fees for
experts and investigators, and legal fees, costs, and expenses
incurred before a lawsuit is filed and in trial, appellate, bankruptcy
and judgment execution proceedings.
(b) Cumulative Remedies. The foregoing remedies are cumulative
and in addition to all other remedies afforded or available to the
parties by law or in equity, and the parties may exercise any such
remedy concurrently, independently or successively.
(c) Attorneys' Fees. In the event that either party is required
to institute litigation or some other alternative dispute resolution
process (other than the proceedings contemplated in Section 6(a)
23<PAGE>
Exhibit 10.2
above) in order to enforce the terms of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorney's fees and
costs from the other party.
7. SURVIVAL
Neither completion of payments hereunder nor termination of this
Agreement shall be deemed to relieve Officer or Company of any rights
or obligations hereunder which by their very nature survive the
completion of payments by the Company, including without limitation,
paragraphs 1(c), 3, 4, 5 and 6 hereof. For the purpose of Sections 3,
4, 5 and 6 the term "Company" shall mean Tampa Electric Company, TECO
Energy, Inc., and all of its subsidiaries and affiliates.
8. ENTIRE AGREEMENT
The Officer acknowledges and agrees that this Agreement contains
the entire agreement between himself and Company and that no
statements or promises have been made by either party concerning the
subjects of this Agreement other than as expressly contained in this
document.
9. EFFECTIVE DATE
This Agreement shall be governed by the Laws of the State of
Florida and shall become effective at the close of business on the
seventh (7th) day following the date that this Agreement is executed
by the Officer.
24<PAGE>
Exhibit 10.2
11. STATEMENT OF UNDERSTANDING
THE OFFICER ACKNOWLEDGES THAT (A) HE HAS CAREFULLY READ THIS
AGREEMENT AND RELEASE, KNOWS AND UNDERSTANDS THE CONTENTS CONTAINED IN
IT AND HAS BEEN GIVEN THE OPPORTUNITY TO CONSIDER THIS AGREEMENT FOR
TWENTY-ONE (21) DAYS AND (B) THE COMPANY HAS ADVISED HIM TO CONSULT AN
ATTORNEY AND HE HAS BEEN GIVEN THE OPPORTUNITY TO DO SO. THE OFFICER
DOES FREELY AND VOLUNTARILY ASSENT TO ALL OF ITS TERMS AND CONDITIONS
AND SIGNS THIS AGREEMENT AS HIS OWN FREE ACT.
If the Officer chooses to waive the 21 day requirement, please
indicate by initialing and dating the following paragraph in the space
provided in the left margin.
THE OFFICER DOES HEREBY WAIVE THE TWENTY-ONE (21) DAY
PERIOD TO CONSIDER THIS AGREEMENT AS REQUIRED
UNDER THE OLDER WORKERS' BENEFIT PROTECTION ACT
Initial (29 USC 626), BUT ACKNOWLEDGES THAT HE HAS
____ REVIEWED AND CONSIDERED THIS AGREEMENT, HAD CONSULTED
WITH HIS ATTORNEY AND FREELY AND VOLUNTARILY
Date ASSENTS TO ALL OF ITS TERMS AND CONDITIONS AND SIGNS
THIS AGREEMENT AS HIS OWN FREE ACT.
IN WITNESS WHEREOF, TAMPA ELECTRIC COMPANY and KEITH S.
SURGENOR, have caused this instrument to be executed in
Tampa, Florida as of the date first written above.
WITNESSES: TAMPA ELECTRIC COMPANY, A
FLORIDA CORPORATION
BY:
Name
Title
CAUTION! READ BEFORE SIGNING
BY:
Name Keith S. Surgenor
DATE SIGNED:
25<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, 1998 March 31, 1998 1997 1996(2) 1995(2) 1994(2) 1993(2)
3.44x (1) 4.20x (1) 4.38x 4.40x 4.28x 3.88x(3) 3.81x(4)
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 a $9.6-million pretax charge associated with
Tampa Electric's ongoing efforts to mitigate the effects of a 1997
FPSC ruling on certain wholesale power supply contracts. 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 3.99x and 4.34x for the three- and
12-month periods ended March 31, 1998, respectively.
(2) Amounts have been restated to reflect the merger of Peoples Gas
System, Inc., with and into Tampa Electric Company.
(3) Includes the effect of a $21.3-million pretax restructuring charge.
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
4.23x for the year ended Dec. 31, 1994.
(4) Includes the effect of the non-recurring $10-million pretax charge
associated with a coal pricing settlement. 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 3.97x for the year ended
Dec. 31, 1993.
26<PAGE>
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAMPA ELECTIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000096271
<NAME> Tampa Electric Company
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<PERIOD-START> JAN-01-1998
<PERIOD-END> Mar-31-1998
<PERIOD-TYPE> 3-mos
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,546
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<TOTAL-ASSETS> 3,070
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<LONG-TERM-DEBT-NET> 727
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<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 141
<LONG-TERM-DEBT-CURRENT-PORT> 4
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<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 903
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<GROSS-OPERATING-REVENUE> 354
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<OTHER-OPERATING-EXPENSES> 292 <F1>
<TOTAL-OPERATING-EXPENSES> 308
<OPERATING-INCOME-LOSS> 46
<OTHER-INCOME-NET> (2)
<INCOME-BEFORE-INTEREST-EXPEN> 44
<TOTAL-INTEREST-EXPENSE> 17
<NET-INCOME> 27
0
<EARNINGS-AVAILABLE-FOR-COMM> 27
<COMMON-STOCK-DIVIDENDS> 34
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<F1> Includes a $9.6-million pretax non-recurring charge.
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<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAMPA ELECTRIC COMPANY BALANCE SHEETS, STATEMENTS OF INCOME AND
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS. THIS 1997 FINANCIAL DATA SCHEDULE HAS
BEEN RESTATED TO REFLECT THE MERGER OF PEOPLES GAS SYSTEM, INC. (PGS)
INTO THE REGISTRANT CONCURRENT WITH THE MERGER OF LYKES ENERGY, INC.
(PGS PARENT) INTO TECO ENERGY, INC. THESE MERGERS WERE ACCOUNTED FOR
AS POOLINGS OF INTEREST.
</LEGEND>
<CIK> 0000096271
<NAME> Tampa Electric Company
<MULTIPLIER> 1000000
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> Mar-31-1997
<PERIOD-TYPE> 3-mos
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,547
<OTHER-PROPERTY-AND-INVEST> 6
<TOTAL-CURRENT-ASSETS> 254
<TOTAL-DEFERRED-CHARGES> 158
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,965
<COMMON> 119
<CAPITAL-SURPLUS-PAID-IN> 849
<RETAINED-EARNINGS> 284
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,252
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<LONG-TERM-DEBT-NET> 757
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<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 82
<LONG-TERM-DEBT-CURRENT-PORT> 5
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<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 849
<TOT-CAPITALIZATION-AND-LIAB> 2,965
<GROSS-OPERATING-REVENUE> 350
<INCOME-TAX-EXPENSE> 21
<OTHER-OPERATING-EXPENSES> 277
<TOTAL-OPERATING-EXPENSES> 298
<OPERATING-INCOME-LOSS> 52
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 52
<TOTAL-INTEREST-EXPENSE> 17
<NET-INCOME> 35
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<EARNINGS-AVAILABLE-FOR-COMM> 35
<COMMON-STOCK-DIVIDENDS> 37
<TOTAL-INTEREST-ON-BONDS> 11
<CASH-FLOW-OPERATIONS> 92
<EPS-PRIMARY> .00
<EPS-DILUTED> .00 <PAGE>
</TABLE>
