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 June 30, 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 June 30, 2004

TABLE OF CONTENTS


PART 1. FINANCIAL STATEMENTS

Item 1.	Financial Statements.

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

	Consolidated Statements of Income (Loss) Three and Six Month Periods Ended June 30, 2004 and 2003	3
	Consolidated Statements of Comprehensive Income (Loss) Three and Six Month Periods Ended June 30, 2004 and 2003	4
	Consolidated Statements of Cash Flows Three and Six Month Periods Ended June 30, 2004 and 2003	5
	Consolidated Balance Sheets June 30, 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	15

PART 2. OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 6.	Exhibits and Reports on Form 8-K	16

	(a) Exhibit Index	16

	(b) Reports on Form 8-K	16

Statement Regarding Forward Looking Information		16

Signature page		17

Certifications		18

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TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

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

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
	*(In thousands)*
OPERATING REVENUES	$	65,069		$	67,761		$	126,722		$	129,126

OPERATING EXPENSES:
Purchased power		17,527			16,342			34,972			33,301
Other operating and maintenance		19,253			17,217			37,166			33,990
Depreciation of utility plant		7,403			7,122			14,752			14,177
Taxes other than income taxes		5,952			5,055			11,190			10,112

Total operating expenses		50,135			45,736			98,080			91,580

OPERATING INCOME		14,934			22,025			28,642			37,546

INTEREST CHARGES AND OTHER INCOME AND DEDUCTIONS:
Interest on long-term debt		6,460			7,792			12,991			12,078
Other interest and amortization of debt-related costs		574			1,020			1,143			1,700
Other income and deductions, net		(411	)		(501	)		(885	)		(847	)

Total		6,623			8,311			13,249			12,931

INCOME BEFORE INCOME TAXES		8,311			13,714			15,393			24,615
Income taxes		2,711			4,882			5,049			8,735

INCOME BEFORE EXTRAORDINARY ITEM		5,600			8,832			10,344			15,880
Extraordinary item - disallowance of stranded costs, net of taxes (Note 3)		(97,836	)		—			(97,836	)		—

NET INCOME (LOSS)	$	(92,236	)	$	8,832		$	(87,492	)	$	15,880

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 (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
	*(In thousands)*
NET INCOME (LOSS)	$	(92,236	)	$	8,832		$	(87,492	)	$	15,880

Cash flow hedges, net of tax:
Interest rate hedge, net of reclassification adjustment (Note 5)		129			(941	)		258			(1,369	)

Total cash flow hedges		129			(941	)		258			(1,369	)

COMPREHENSIVE INCOME (LOSS)	$	(92,107	)	$	7,891		$	(87,234	)	$	14,511

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)


	Six Months Ended June 30,
	2004			2003
	*(In thousands)*
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers	$	111,260		$	118,807
Purchased power costs paid		(34,656	)		(33,348	)
Cash paid for payroll and to other suppliers		(24,743	)		(31,245	)
Interest paid, net of amounts capitalized		(13,215	)		(15,884	)
Income taxes paid		(1,366	)		(7,504	)
Other taxes paid		(14,551	)		(13,404	)
Other operating cash receipts and payments, net		487			534

NET CASH PROVIDED BY OPERATING ACTIVITIES		23,216			17,956

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant and other investing activities		(22,351	)		(19,848	)

NET CASH USED IN INVESTING ACTIVITIES		(22,351	)		(19,848	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on common stock		(6,000	)		(18,400	)
Issuance of senior notes, net of discount		—			248,923
Repayments to credit facility - net		—			(171,000	)
Redemptions:
Senior notes		(8,375	)		—
Notes payable to affiliate		—			(14,557	)
Financing and redemption costs		(921	)		(1,407	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(15,296	)		43,559

NET CHANGE IN CASH AND CASH EQUIVALENTS		(14,431	)		41,667
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		56,907			284

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	42,476		$	41,951

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income (loss)	$	(87,492	)	$	15,880
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Extraordinary item - disallowance of stranded costs, net of taxes		97,836			—
Depreciation of utility plant		14,752			14,177
Amortization of debt-related costs and other deferred charges		1,316			1,546
Allowance for funds used during construction		(555	)		(457	)
Deferred income taxes		25,658			540
Investment tax credits		(556	)		(397	)
Deferred purchased power and fuel costs		540			1,324

Cash flows impacted by changes in current assets and liabilities:
Accounts receivable		(559	)		(670	)
Accounts payable		(996	)		(497	)
Accrued interest		(193	)		529
Accrued taxes		(24,610	)		(2,238	)
Changes in other current assets and liabilities		(2,239	)		(5,009	)
Interest rate lock on issuance of senior notes		—			(4,162	)
Other, net		314			(2,610	)

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	23,216		$	17,956

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


	June 30, 2004 (Unaudited)		December 31, 2003
	*(In thousands)*
*ASSETS*

CURRENT ASSETS:
Cash and cash equivalents	$	42,476	$	56,907
Special deposits		3,076		2,520
Accounts receivable, net		33,002		32,443
Federal income tax receivable		26,453		—
Materials and supplies, at lower of cost or market		1,157		1,082
Other current assets		2,121		662

Total current assets		108,285		93,614

UTILITY PLANT:
Electric plant		826,374		804,622
Construction work in progress		8,670		13,666

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