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
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: 1-8847
TNP ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
| Texas | 75-1907501 | |
| (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. has no publicly traded shares of common stock outstanding.
TNP Enterprises, Inc. 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. | |||||
| TNP Enterprises, Inc. (TNP) and Subsidiaries: | ||||||
|
Consolidated Statements of Income (Loss) |
3 | |||||
| 4 | ||||||
|
Consolidated Statements of Cash Flows |
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 | 19 | ||||
| Item 4. |
Controls and Procedures | 27 | ||||
| PART 2. OTHER INFORMATION | ||||||
| Item 1. |
Legal Proceedings | 28 | ||||
| Item 6. |
Exhibits and Reports on Form 8-K | 28 | ||||
| (a) | Exhibit Index | 28 | ||||
| (b) | Reports on Form 8-K | 28 | ||||
| Statement Regarding Forward Looking Information | 28 | |||||
| 29 | ||||||
| Certifications |
30 | |||||
-2-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (In thousands) | ||||||||||||||||
| OPERATING REVENUES |
$ | 177,504 | $ | 223,525 | $ | 339,654 | $ | 407,246 | ||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Purchased power |
88,457 | 138,024 | 167,494 | 274,993 | ||||||||||||
| Other operating and maintenance |
47,201 | 54,948 | 94,383 | 107,010 | ||||||||||||
| Accrual for payment (credit) to TNMP |
(48 | ) | 419 | (48 | ) | 419 | ||||||||||
| Depreciation |
7,497 | 7,196 | 14,929 | 14,320 | ||||||||||||
| Taxes other than income taxes |
7,529 | 6,939 | 14,291 | 13,709 | ||||||||||||
| Total operating expenses |
150,636 | 207,526 | 291,049 | 410,451 | ||||||||||||
| OPERATING INCOME (LOSS) |
26,868 | 15,999 | 48,605 | (3,205 | ) | |||||||||||
| INTEREST CHARGES, PREFERRED DIVIDENDS, AND OTHER INCOME AND DEDUCTIONS: |
||||||||||||||||
| Interest on long-term debt |
15,505 | 16,065 | 31,085 | 28,499 | ||||||||||||
| Other interest and amortization of debt-related costs |
1,121 | 2,249 | 2,232 | 3,366 | ||||||||||||
| Dividends on preferred stock and other |
6,328 | — | 12,234 | — | ||||||||||||
| Other income and deductions, net |
(489 | ) | (505 | ) | (1,044 | ) | (875 | ) | ||||||||
| Total |
22,465 | 17,809 | 44,507 | 30,990 | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES |
4,403 | (1,810 | ) | 4,098 | (34,195 | ) | ||||||||||
| Income taxes (benefits) |
3,580 | (792 | ) | 5,523 | (13,151 | ) | ||||||||||
| INCOME (LOSS) BEFORE EXTRAORDINARY ITEM |
823 | (1,018 | ) | (1,425 | ) | (21,044 | ) | |||||||||
| Extraordinary item - disallowance of stranded costs, net of taxes (Note 3) |
(97,836 | ) | — | (97,836 | ) | — | ||||||||||
| NET LOSS |
(97,013 | ) | (1,018 | ) | (99,261 | ) | (21,044 | ) | ||||||||
| Dividends on preferred stock and other |
— | 5,515 | — | 10,664 | ||||||||||||
| LOSS APPLICABLE TO COMMON STOCK |
$ | (97,013 | ) | $ | (6,533 | ) | $ | (99,261 | ) | $ | (31,708 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
-3-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (In thousands) | ||||||||||||||||
| NET LOSS |
$ | (97,013 | ) | $ | (1,018 | ) | $ | (99,261 | ) | $ | (21,044 | ) | ||||
| Cash flow hedges, net of tax: |
||||||||||||||||
| Gas hedge, net of reclassification adjustment (Note 5) |
(2,850 | ) | 762 | (159 | ) | (2,262 | ) | |||||||||
| Interest rate hedge, net of reclassification adjustment (Note 5) |
339 | (990 | ) | 447 | (1,635 | ) | ||||||||||
| Total cash flow hedges |
(2,511 | ) | (228 | ) | 288 | (3,897 | ) | |||||||||
| COMPREHENSIVE LOSS |
$ | (99,524 | ) | $ | (1,246 | ) | $ | (98,973 | ) | $ | (24,941 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
-4-
TNP ENTERPRISES, INC. AND SUBSIDIARIES
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 |
$ | 328,086 | $ | 362,723 | ||||
| Purchased power costs paid |
(180,907 | ) | (233,001 | ) | ||||
| Natural gas option premiums paid |
— | (19,147 | ) | |||||
| Cash paid for payroll and to other suppliers |
(82,474 | ) | (92,703 | ) | ||||
| Interest paid, net of amounts capitalized |
(31,475 | ) | (32,137 | ) | ||||
| Income taxes refunded |
652 | 583 | ||||||
| Other taxes paid |
(17,414 | ) | (15,468 | ) | ||||
| Other operating cash receipts and payments, net |
645 | 565 | ||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
17,113 | (28,585 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Additions to utility plant and other investing activities |
(22,844 | ) | (20,075 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES |
(22,844 | ) | (20,075 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Issuance of TNMP senior notes, net of discount |
— | 248,923 | ||||||
| Repayments to TNMP/First Choice credit facility - net |
— | (164,000 | ) | |||||
| Redemptions: |
||||||||
| TNMP senior notes |
(8,375 | ) | — | |||||
| TNP senior secured credit facility |
(563 | ) | — | |||||
| TNP term loan |
— | (800 | ) | |||||
| Financing and redemption costs |
(1,033 | ) | (2,332 | ) | ||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
(9,971 | ) | 81,791 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
(15,702 | ) | 33,131 | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
117,788 | 16,690 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 102,086 | $ | 49,821 | ||||
| RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (99,261 | ) | $ | (21,044 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Extraordinary item - disallowance of stranded costs, net of taxes |
97,836 | — | ||||||
| Accrued dividends on preferred stock and other |
12,234 | — | ||||||
| Accrual for payment to TNMP |
(48 | ) | 419 | |||||
| Depreciation |
14,929 | 14,320 | ||||||
| Amortization of debt-related costs and other deferred charges |
2,244 | 3,205 | ||||||
| Allowance for funds used during construction |
(555 | ) | (457 | ) | ||||
| Deferred income taxes |
26,695 | 118 | ||||||
| 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 |
5,109 | (29,317 | ) | |||||
| Accounts payable |
(8,473 | ) | 43,175 | |||||
| Accrued interest |
(197 | ) | 705 | |||||
| Accrued taxes |
(22,016 | ) | (13,900 | ) | ||||
| Changes in other current assets and liabilities |
(11,755 | ) | (16,798 | ) | ||||
| Interest rate lock on issuance of senior notes |
— | (4,162 | ) | |||||
| Other, net |
387 | (5,776 | ) | |||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
$ | 17,113 | $ | (28,585 | ) | |||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
| Payment of dividends on preferred stock by issuance of additional preferred shares |
$ | 11,595 | $ | 10,080 | ||||