TEXAS NEW MEXICO POWER CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

¨	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: 2-97230

TEXAS-NEW MEXICO POWER COMPANY

(Exact name of registrant as specified in its charter)


Texas		75-0204070
(State of incorporation)		(I.R.S. employer identification number)

4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113

(Address and zip code of principal executive offices)

Registrant’s telephone number, including area code 817-731-0099

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 ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨ No x

TNP Enterprises, Inc. holds all 10,705 outstanding common shares of Texas-New Mexico Power Company.

Texas New-Mexico Power Company and Subsidiaries

Quarterly Report on Form 10-Q for the period ended March 31, 2004

TABLE OF CONTENTS


	PART 1. FINANCIAL STATEMENTS
Item 1.	Financial Statements.

	Texas-New Mexico Power Company (TNMP) and Subsidiaries:

	Consolidated Statements of Income Three Month Periods Ended March 31, 2004 and 2003	3

	Consolidated Statements of Comprehensive Income Three Month Periods Ended March 31, 2004 and 2003	4

	Consolidated Statements of Cash Flows Three Month Periods Ended March 31, 2004 and 2003	5

	Consolidated Balance Sheets March 31, 2004, and December 31, 2003	6

	Notes to Consolidated Interim Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 4.	Controls and Procedures	14

	PART 2. OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 6.	Exhibits and Reports on Form 8-K	14

	(a) Exhibit Index	14

	(b) Reports on Form 8-K	14

	Statement Regarding Forward Looking Information	14

Signature page		15

Certifications		16

-2-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2004			2003
	*(In thousands)*
OPERATING REVENUES	$	61,654		$	61,365

OPERATING EXPENSES:
Purchased power		17,446			16,959
Other operating and maintenance		17,913			16,773
Depreciation of utility plant		7,349			7,055
Taxes other than income taxes		5,238			5,057

Total operating expenses		47,946			45,844

OPERATING INCOME		13,708			15,521

INTEREST CHARGES AND OTHER INCOME AND DEDUCTIONS:
Interest on long-term debt		6,531			4,286
Other interest and amortization of debt-related costs		569			680
Other income and deductions, net		(474	)		(347	)

Total		6,626			4,619

INCOME BEFORE INCOME TAXES		7,082			10,902
Income taxes		2,338			3,854

NET INCOME	$	4,744		$	7,048

The accompanying notes are an integral part of these consolidated financial statements.

-3-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2004		2003
	*(In thousands)*
NET INCOME	$	4,744	$	7,048

Cash flow hedges, net of tax:
Interest rate hedge, net of reclassification adjustment (Note 4)		129		(428	)

Total cash flow hedges		129		(428	)

COMPREHENSIVE INCOME	$	4,873	$	6,620

The accompanying notes are an integral part of these consolidated financial statements.

-4-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2004			2003
	*(In thousands)*
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers	$	58,167		$	50,049
Purchased power costs paid		(17,477	)		(14,188	)
Cash paid for payroll and to other suppliers		(14,783	)		(14,391	)
Interest paid, net of amounts capitalized		(5,504	)		(7,032	)
Income taxes refunded		630			904
Other taxes paid		(11,362	)		(10,094	)
Other operating cash receipts and payments, net		278			196

NET CASH PROVIDED BY OPERATING ACTIVITIES		9,949			5,444

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant		(9,363	)		(8,884	)

NET CASH USED IN INVESTING ACTIVITIES		(9,363	)		(8,884	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions:
Senior notes		(5,000	)		—
Notes payable to affiliate		—			(10,757	)
Borrowings from TNMP/First Choice credit facility - net		—			14,000
Financing costs		(295	)		73

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(5,295	)		3,316

NET CHANGE IN CASH AND CASH EQUIVALENTS		(4,709	)		(124	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		56,907			284

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	52,198		$	160

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income	$	4,744		$	7,048
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of utility plant		7,349			7,055
Amortization of debt-related costs and other deferred charges		688			551
Allowance for funds used during construction		(277	)		(220	)
Deferred income taxes		2,477			(120	)
Investment tax credits		(317	)		(159	)
Deferred purchased power and fuel costs		34			921
Cash flows impacted by changes in current assets and liabilities:
Accounts receivable		4,377			(5,349	)
Accounts payable		(2,806	)		1,727
Accrued interest		1,043			(2,611	)
Accrued taxes		(5,315	)		(103	)
Changes in other current assets and liabilities		(2,223	)		(3,866	)
Other, net		175			570

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	9,949		$	5,444

The accompanying notes are an integral part of these consolidated financial statements.

-5-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED BALANCE SHEETS


	March 31, 2004 (Unaudited)		December 31, 2003
	*(In thousands)*
*ASSETS*
CURRENT ASSETS:
Cash and cash equivalents	$	52,198	$	56,907
Special deposits		2,524		2,520
Accounts receivable		28,066		32,443
Materials and supplies, at lower of cost or market		1,143		1,082
Deferred purchased power and fuel costs		220		135
Accumulated deferred income taxes		70		70
Other current assets		869		457

Total current assets		85,090		93,614

UTILITY PLANT:
Electric plant		809,120		804,622
Construction work in progress		15,116		13,666

Total		824,236		818,288
Less accumulated depreciation		265,148		259,670

Net utility plant		559,088		558,618

LONG-TERM AND OTHER ASSETS:
Other property and investments, at cost		343		343
Recoverable stranded costs		298,651		298,651
Regulatory tax assets		1,906		1,685
Deferred charges		28,418		28,437

Total long-term and other assets		329,318		329,116

	$	973,496	$	981,348

*LIABILITIES AND SHAREHOLDER’S EQUITY*
CURRENT LIABILITIES:
Accounts payable	$	7,971	$	13,302
Accrued interest		8,608		7,565
Accrued taxes		3,476		8,791
Accrued payroll and benefits		3,054		5,048
Customers’ deposits		740		702
Accrued dividends		6,000		—
Other current liabilities		4,014		3,808

Total current liabilities		33,863		39,216

LONG-TERM AND OTHER LIABILITIES:
Deferred purchased power and fuel costs		40,963		40,844
Accumulated deferred income taxes		154,944		152,167
Accumulated deferred investment tax credits		18,142		18,459
Regulatory liability-accrued cost of removal		38,895		38,218
Deferred credits and other liabilities		23,124		22,839

Total long-term and other liabilities		276,068		272,527

LONG-TERM DEBT		418,713		423,626

COMMON SHAREHOLDER’S EQUITY:

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